IMF vindicates Biti’s position on funds

In a move seen as the IMFs disapproval of the populist policies pursued by Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono, an IMF mission that concluded its economic review mission to Harare last week said the southern African country should use the US$510 million allocated to it in September to boost its international reserves rather than spending it.

Zimbabwe’s crippled economy received a boost in September when the IMF sanctioned a US$510 million loan, its first to the country in a decade.

The money was part of Special Drawing Rights (SDR) allocations by the IMF meant to bail out countries hit hardest by the global economic crisis.

But the funds have stirred conflict between the partners in Zimbabwe’s fragile unity government amid fears it would used to shore up President Robert Mugabe’s regime.

Gono has fought a losing battle by trying to force Biti to release the funds to finance the 2009/10 farming season and other government requirements.

He has tried to whip up emotions of members of Mugabes Zanu (PF) party by suggesting that the minister was sabotaging plans to revive the agricultural sector.

The IMF mission noted that in light of Zimbabwe’s debt overhang and low-income status, Harare should seek sustained concessional donor financing in support of their medium-term growth and poverty reduction objectives rather than relying on non-concessional SDR-related funds.

The SDR allocation provided an important one-off boost to Zimbabwe’s depleted international reserves, and should be saved, the mission said.

Gono is seen as part of the reactionary elements fighting a unity government formed by Zanu (PF) and the MDC in February.

It was not clear how the latest IMF position would impact on an earlier decision by Harare to use the funds for public works programmes and to finance productive sectors such as mining and manufacturing.

The IMF mission also said in the same statement that political consensus was needed to continue cash budgeting, restrain wages, focus spending on development and social programmes, and to resolve governance problems at the central bank.

Enforcing property rights and maintaining the rule of law were also singled out.

Since the start of the year, the government had achieved a “significant” budget revenue improvement, abandoned the local currency, and largely liberalised prices and the exchange system, the IMF said.