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IMF gives Nerp thumbs down

Ngoni Chanakira

THE International Monetary Fund (IMF), which last Friday suspended Zimbabwe’s voting and related rights, says government has not adopted comprehensive and consistent policies needed to addres

s the country’s serious economic malaise.

This comes barely three months after the Bretton Woods institution praised government for making “modest efforts to tighten its monetary policy” through the much-publicised National Economic Revival Programme (Nerp).

On March 13 the IMF hailed Nerp, saying, “if it is pursued with increasing vigour, inflation will eventually be brought under control”.

Inflation has however, steadily risen to reach a record 269,2%.

Zimbabwe’s suspension, which will be reviewed in December, was announced against the backdrop of a five-day nationwide mass action.

Executives said the decision had made it extremely difficult to market Zimbabwe at the ongoing African Economic Forum in Durban, South Africa.

More than 18 top local businessmen accompanied by the Ministers of Finance and Economic Development and of Industry and International Trade, Herbert Murerwa and Samuel Mumbengegwi, respectively are gathered for the summit which began on Wednesday and ends today.

The IMF’s executive board said: “Economic and social conditions in Zimbabwe have deteriorated progressively over the past four years. Real output has dropped by one third, inflation has reached 270% in the year through April 2003 and welfare and poverty indicators have deteriorated.

“The Zimbabwean authorities introduced some policy measures since early 2003 to arrest the decline in economic activity, including a devaluation of the exchange rate of the Zimbabwean dollar from $55 per United States dollar for most transactions, adjustments in fuel and electricity tariffs, rolling back price controls, and raising interest rates moderately.

However, the authorities have not adopted the comprehensive and consistent policies needed to address Zimbabwe’s serious economic problems.”

As a result of the suspension, Zimbabwe can no longer appoint a governor or alternate governor to the IMF, participate in the election of an executive director for its board, or cast its vote in decisions on IMF policy or country matters.

Business leaders said for Zimbabwe to garner any support from multilateral or bilateral donor agencies, the confidence from having a “sound relationship with the IMF is paramount”.

National Economic Consultative Forum (Necf) spokesman Nhlanhla Masuku differed saying Zimbabwe could do without the Bretton Woods institutions such as the IMF and World Bank and should instead adopt “home grown policies from local economists”.

Masuku said some problems being faced by Zimbabwe today were “doses of IMF bitter pills”.

Economist John Robertson said the IMF decision would not change much in Zimbabwe since the financial institution had stopped funding the country’s economic recovery programmes anyway.

He said: “It is very difficult to say that it (the decision) matters very much. It is just like our suspension from the Commonwealth. However, there are some ramifications because to regain IMF confidence will be very difficult.”

Zimbabwe has been in continuous arrears to the IMF since February 2001.

As of May 30, Zimbabwe’s arrears to the IMF amounted to SDR164,9 million or US$233 million, representing 47% of the country’s quota in the Fund.

The suspension of a member’s voting and related rights is one in a series of escalating remedial measures that the IMF applies to members that fail to meet their obligations under its Articles of Agreement.

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