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IMF to decide Zimbabwe’s fate

Ngoni Chanakira

THE International Monetary Fund (IMF)’s executive board meets in Washington today to decide whether or not to suspend Zimbabwe’s voting rights.

FONT face=”Verdana, Arial, Helvetica, sans-serif”>It is reliably understood that the Minister of Finance Herbert Murerwa is already in Washington to attend the crucial meeting.

The minister flew into Washington from Addis Ababa, Ethiopia, where he attended the annual meeting of the African Development Bank with other African finance ministers.

The IMF has on several occasions threatened to suspend Zimbabwe because of its continued failure to make timely payments towards its arrears, now amounting to SDR158,75 million or US$224,32 million as at June 2.

The country’s total debt to the IMF stands at SDR206 127 543 or about US$290 million.

Zimbabwe had promised to make regular US$1,4 million monthly payments.

It gave this assurance to an IMF team that visited the country in March in connection with the annual Article IV Consultation.

Besides the monthly payments Zimbabwe has riled the IMF by failing to meet other obligations demanded by the Bretton Woods institution. These include improving the country’s macroeconomic fundamentals, solving the political crisis, resolving the controversial land programme, and improving its tattered human rights record.

The IMF pointed out that Zimbabwe’s gross domestic product (GDP) had declined by about 30%, and was still contracting.

It said inflation had doubled in each of the last two years, hitting the 200% mark. Last month inflation reached a record 269,2% but the IMF says it could continue soaring to more than 450% by year-end.

The fund said there were widespread shortages, poverty and unemployment had risen, and the HIV/Aids pandemic was worsening.

In an interview Gerry Johnson, IMF senior resident representative, this week said: “The situation regarding Zimbabwe has not changed since the IMF team came and issued its report in March.

The board is meeting on June 6 (today) and we expect a decision on Zimbabwe to be made then. I believe the executive board closely examined the progress made on policies and payments since March.”

When it issued its report on March 13, the IMF confirmed that among the issues included in the discussions on June 6 was the possible suspension of Zimbabwe’s voting and related rights in the Fund.

Suspension would result in the country being “blacklisted” and stopped from voting on any decisions taken by members.

The international community normally takes its cue from the IMF and World Bank when considering financial support to developing countries.

Zimbabwe’s suspension would therefore be a major body blow to much-needed foreign currency allocations.

The country’s capital account is estimated to have registered a deficit of US$350 million in 2002 from a figure of US$420 million in 2001.

Analysts said the deficit was largely driven by the decline in foreign direct and portfolio investment inflows, limited participation of the donor community as well as the lack of much-needed balance-of-payments support.

The country’s foreign payment arrears continued to build up during 2002 and are forecast to have ended the year at US$1,5 billion, up from US$700 million in 2001.

Bankers and economists say the country needs the IMF and World Bank because they would bring much-needed foreign currency and “goodwill” to Zimbabwe.

“Zimbabwe needs to improve its relations with the multilateral lenders, among many others,” NMB Holdings deputy managing director James Mushore said. “Normalising relations with the IMF would unlock much-needed donor support, as international confidence will be bolstered.

To normalise relations the country has to discharge its financial obligations to the fund as a matter of urgency.”

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