RESERVE Bank governor, Gideon Gono this week broke his silence on why the country pumped out US$120 million to pay the International Monetary Fund (IMF) insisting that this was for the gr
eater good of the country as it reduces its high perceived risk.
Comments by Gono insisting that Zimbabwe needed to mend its relations with the IMF are in stark contrast to President Robert Mugabe’s scathing attacks on the fund.
Two weeks ago Mugabe attacked and rubbished the IMF soon after the fund had given Zimbabwe a six-month reprieve, saying Harare had never been friends with the fund and, would never be.
Mugabe has consistently attacked the IMF in the past five years.
However, Gono on Tuesday insisted that it was in Zimbabwe’s interests to re-engage the fund.
He said normalisation of relations with the international lending cartel also reduces the country’s high risk, adding that mending relations also enhances international credit worthiness
“The suspension of the compulsory withdrawal gives the country ample time to improve (its) macroeconomic policies and increase payments to the IMF. This paves way for access to other critical benefits such as technical assistance,” Gono said.
Gono said Zimbabwe would strive to maintain good relations with the Bretton Woods institutions.
“At present, Zimbabwe does not qualify for debt rescheduling because it is not on an IMF-supported programme. IMF membership brightens prospects for a Fund-supported programme, which is a precondition for the country’s eligibility for debt-relief under the Paris Club and other creditor group, ” he said.
He also entertains hopes that the country would also benefit from some IMF programmes like the Poverty Reduction and Growth Facility.
Gono said that an IMF-supported economic stabilisation programme will immediately unlock the much-needed bridging finance, while the country’s export sector recovers.
“Potential foreign investors are deterred by the exclusion of the country from the fund as they have confidence in the IMF decisions on countries. The decision taken by the IMF not to suspend the country influences Zimbabwe’s access to credit from the international community,” Gono said.
Speaking on why they made a hefty US$120 million payout to the fund at a time when the country needed foreign currency to import fuel and food, Gono said the payment was necessary to save Zimbabwe.
“Expulsion from the IMF would have resulted in the loss of the EU, United States and Japanese markets for Zimbabwean products,” Gono said.
“In 2004 total export earnings amounted to US$1,7 billion, of which US$466 million accrued from trade with the European Union, United States of America and the Japanese markets. This is enough to cater for about two-thirds of the country’s annual fuel.”
Zimbabwe’s expulsion from the fund would have therefore worsened the economy through loss of trading partners, Gono said.
He also argued that normalisation of relations with the Bretton Woods institutions enhance Harare’s battered international creditworthiness.
“In particular, an IMF-supported economic stabilisation programme will immediately unlock the much-needed bridging finance, while the country’s export sector recovers,” he said.
“The current strategy to prioritise payments to the multi-lateral institutions should be pursued vigorously in order to pave way for dialogue with other international creditors.”
Zimbabwe first incurred its arrears to the IMF in 2001.
Since the beginning of this year, Zimbabwe has paid the IMF US$134 million but still has to offset the remaining US$175 million which it has pledged to have settled by November next year.