HomeLocal NewsIMF delegation in Zim to Assess State of Economy

IMF delegation in Zim to Assess State of Economy

A SIX-member delegation from the International Monetary Fund (IMF) is in the country on a fact-finding mission to evaluate the country’s economy since the formation of the government of national unity.

Part of the delegation which arrived on Wednesday, yesterday held five meetings with Ministry of Finance officials on the external domestic debts, revenue and expenditure.

Other members of the delegation are expected in the country by June 21 for a week’s stay.

During their stay, a series of high profile meetings with government, banking, industry and agricultural officials have been lined up.

The delegation is composed of Vitaliy Kramarenko (head of mission) Wouter Bossu, Lars Engstrom, Gilda Fernandez, Richard Hughes and Denevieve Verdier.

On completion of their work on June 29, the mission is expected to hold a “report back meeting” with Finance minister Tendai Biti,  Economic Planning and Investment Promotion minister Elton Mangoma and Reserve Bank governor Gideon Gono.

According to the mission’s work schedule seen by businessdigest, all sectors of the economy, including health, education, infrastructure and current food situation will be scrutinised.  

The Reserve Bank’s governance and accounting reforms will come under spotlight.

The IMF has in the past pointed out key governance weaknesses including lack of enforcement of the Reserve Bank of Zimbabwe Act’s accountability requirements and non-compliance with the International Financial Reporting Standards.

The IMF will discuss with key central bank technical staff and the Finance ministry on “recent developments on the monetary and fiscal policy, the central bank’s financial statements for 2009 and mid-year 2009 budget revision assumptions”.

The current foreign currency inflows and international reserves will also be reviewed.

According to the IMF document, the Reserve Bank would be tasked to disclose “estimates for foreign currency in circulation, its currency composition and any new legislation, regulations orders and circulars related to monetary financial and exchange restriction areas that have been introduced since March 2009”.

 Early this year, government adopted the use of multiple currencies but foreign currency inflows have remained limited.

On the monetary sector, the mission will seek “revised and updated data including a monetary control programme, broad money survey, and detailed data on other items (assets and liabilities) quasi-fiscal operations, gross foreign assets, net foreign assets and net international reserves”.

According to the IMF, quasi-fiscal activities by the Reserve Bank increased in the context of the bank’s weak governance last year.

“They are estimated at US$1,1 billion (36% of GDP) in 2008, and included election-related expenses, transfers to parastatals, subsidised directed lending, subsidised provision of equipment and fertilisers to farmers, and allocation of foreign exchange at subsidised exchange rates,” the IMF says in its May 4 Executive Board assessment on the  Article IV consultation with Zimbabwe

Efforts if any, undertaken by government to “reconcile the external debt number with creditors” would also be looked into.

The IMF team is also interested in reviewing government line ministries’ domestic debt payment arrears between January and May.

The soundness of the banking sector which Biti recently said was under “severe stress” would be reviewed.
Each bank would be required to disclose “monthly data on reserve requirements and actual reserves held during the first five months of 2009”.

 An outline of the “re-capitalisation plan that banks are required to finalise by June 15” will be studied.
The banking sector has shrunk as reflected in deposits that declined from almost US$1billion at the end of 2005 to about US$300 million (of which local currency dominated currency deposits amounted to an equivalent of US$6 million) at end of last year, the IMF noted.

Several donors have advanced aid packages to Zimbabwe and the mission wants “a data table on newly contracted short-term and long-term external credits for 2009 by currency, and borrower agency…indicating whether these credits will fund public or private borrowings”.

It said it wants a summary of the size and timing of budget support from South Africa and other potential donors for 2009.

The Development Bank of South Africa, DBSA, has pledged to assist in infrastructure development programmes by providing funding and technical assistance.

The financial institution, which was mandated by the South African government to assist in the rehabilitation of infrastructure, expressed its intentions to support different infrastructural projects in areas of electrical power supply, educational institutions and road rehabilitation.

The mission will also meet the United Nations Development Programme (UNDP) and Donors’ Economists Group to discuss the humanitarian appeal for 2009.

However, donors have set conditions around political and economic reforms before they release any money.

To date Zimbabwe has only been able to secure over US$1 billion and yet the country needs U$10 billion in the next three years for economic recovery.

The mining sector, which government says under the Short Term Emergency Recovery Programme was crucial in the recovery of the economy, would be reviewed.

On agriculture, the IMF team will discus output projections for each commodity with farmer organisations and food requirements and supply with the World Food Programme.

By Nqobile Bhebhe

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