We have already heard the Finance Minister saying that the $100 million balance of SDRs money is to be reserved for elections. SDRs are supplementary foreign exchange reserve assets defined and maintained by the IMF. They are not actually money – but they represent a claim to currency held by IMF member countries for which they may be exchanged.
The year 2008 was marked by an acute global financial and economic crisis, triggered by the bursting of the US housing market bubble and a rise in foreclosures. This became the most severe global recession since the Great Depression of the 1930s, and exposed fundamental weaknesses in financial systems worldwide.
The International Labour Organisation estimated global unemployment in 2009 to have increased to 50 million, and global growth plummeted. The situation was worse for us, marked by a chaotic election, drought, stratospheric inflation and a defunct Zimdollar. Many troubled countries begged the IMF for assistance, putting to test the Fund’s ability to help.
In response to the catastrophic effects of the crisis, the G20 convened in April 2009 to discuss measures to address the global economic crisis. It agreed that a supplementary fund to boost the IMF should be increased from $50 billion to $500 billion – and that the IMF should create new SDRs worth $250 billion.
These were allocated to 185 countries according to quota – we got a paltry 0.206% ($505 million), 81 times smaller than the US. Of this $120 million was used for Infrastructure, $70 million for agriculture, $50 million for lines of credit ($17.4 million of which is trapped at Interfin Bank), $142 million for settling IMF obligations – leaving $102 million for elections.
Using the money for elections will not create any jobs, or increase industry’s capacity utilisation, or ease the prevailing liquidity crunch. There are many economic challenges that, morally and legitimately, deserve that money more.
We have millions of unemployed youths walking in the streets. Imagine how the $100 million could turn around their fortunes, if it provided loans as a revolving fund for them to start income generating projects. Many industries are ailing and Bulawayo alone has seen more than 20,000 workers losing their jobs.
Assuming that elections will only be held in 2013, it is incumbent upon the government to allocate the $100 million SDRs money towards important economic projects which have the potential to trigger high economic activity. Elections should be budgeted for in the 2013 national budget.
Although SDRs are not loans, countries still have to pay interest to the IMF. The sooner we realise that SDRs are not free money, the better we should start lobbying that we just cannot spent the money on elections.
Post published in: Opinions & Analysis