IMF funds: Biti, Gono Poles Apart

Murray & Roberts chief Canada Malunga has ideas about where the International Monetary Fund (IMF) money should go —into construction and infrastructure development. And naturally his company would get a lion’s share of the allocation.


Although Malunga was humouring the market while presenting the group’s financial results this week, he clearly has an idea of what to do with the funds unlike officials in government.
Last Friday, Zimbabwe woke up to the good news that the IMF had finally loosened its purse and released over US$500 million to the economically troubled nation.  
But the bad news as it turns out is government and the central bank are divided on what to do with the money.
Finance Minister Tendai Biti does not want to touch the money while central bank chief Gideon Gono could perhaps spend it all in an hour judging from his comments. While Biti wants to exercise caution in dealing with the money, Gono has a shopping list ready.
For instance, Gono believes the money could lift capacity in industry, import machinery, do another round of farm mechanisation, recapitalise perennial loss-makers like NRZ, fund chemical and fertiliser companies, engage in mining exploration and a litany of other wishes.
Gono said: “We can use the money to import capital equipment, import raw materials for industry, for capacitating NRZ, Hwange, the telecoms sector, and payment of the IMF outstanding debt of US$140 million so that Zimbabwe is not in arrears. But not for payment of salaries by government. Sectors we have recommended to benefit from the funds are agriculture and firms that produce fertilisers and chemicals locally, the manufacturing sector, mining  sector including SME’s, tourism, infrastructure, mining exploration and power generation sector. No consumption spending or importation of luxuries, groceries etc, that we are saying NO to. But the ultimate decision lies with the Ministry of Finance, cabinet and stakeholders. My role is advisory.”
He claims Biti is working around the clock to make sure some of the money goes to the Short Term Economic Recovery Programme (Sterp) and is engaging stakeholders with a view of aligning priority areas in an “inclusive manner”.
But Gono’s wish list is a marked departure from Sterp — an economic policy document adopted by the government — clearly spelling out a roadmap and all the knitty-gritties of what needs to be done to get the economy pumping again. At this rate, analysts say Gono and Biti could sit around staring at the neatly stacked money in the safe until they agree on what to do with it while a clear economic recovery document sits gathering dust on another desk.
Biti argues: “We would be contracting debt when our balances of payments and our debt burden is very fragile. We have less than US$2 million in import reserves. Our arrears account for 150% of gross domestic product. There is no way we can take that (loan) up in the context of the arrears and the deficit. It would be very imprudent.”
But Gono’s adviser Munyaradzi Kereke is itching for the money to be disbursed. He says Zimbabwe has no choice but to take the money no matter the alleged repercussions to the country.
“We continue to await directives from government on how to deploy it. It is really unfortunate that as a country and at very senior levels we are publicly almost saying  we do not want IMF funding because it’s an expensive loan while the reality of the matter is the SDR’s already deposited  in the RBZ account are sitting as a costless asset on which we are paying zero interest,” he said.
Kereke says government should “get real” and not expect free funds.
“If this is an unsustainable loan then we are saying Zimbabwe wants money for free. Please let’s be real,” said Kereke.
The allocation is a general provision to IMF members that are participants in the Special Drawing Rights (SDR) department  in proportion to their existing quotas in the Fund, which are based broadly on their relative size in the global economy.
The SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets.
Zimbabwe needs US$8,4 billion this year to revive industry, restore health and education facilities.
Mugabe fired former Finance Minister Herbert Murerwa years back for sticking to what the aged leader described as “textbook economics” while the people suffered. Mugabe argued that there was nothing wrong with resorting to the money printing to save the people.  Against such a background, where Mugabe believes that conventional economics can be traded for political mileage, analysts see the aged leader intervening on the IMF funds debacle in defiance of Biti’s textbook economics to curry favour with the would be beneficiaries of the funds.
The last tranche of US$104 million did not get to Zimbabwe because the country has outstanding debts with Bretton Woods institution.
But even with over US$400 million in the bag after the IMF escrowed the balance, Zimbabwe still doesn’t have a plan for the money. Maybe the money should go to Malunga’s Murray & Roberts after all.

 

Chris Muronzi