BY TATIRA ZWINOIRA
ZIMBABWE’S former Finance ministers Herbert Murerwa and Tendai Biti have warned the government against using the recent US$961 million worth of special drawing rights (SDRs) from the International Monetary Fund (IMF) on recurrent expenditure such as on the forex auction.
On August 23, the Reserve Bank of Zimbabwe (RBZ) received 677,4 million in SDRs worth US$961 million into its account with the IMF as part of a larger global package of US$650 billion.
In that regard, Finance minister Mthuli Ncube and RBZ governor John Mangudya in a joint statement announced the money would be used to support the Zimbabwean dollar that is being controlled with a non-market determined forex rate on the foreign exchange auction.
The idea is that once the Zimdollar is stabilised, the money could go towards social and productive sectors of the economy.
The social sectors targeted are health, education and vulnerable groups while productive sectors are industry, agriculture and mining.
This comes as the government is severely debt-ridden and is dealing with a population where over half the people are now extremely poor with rates rising even further.
At the Zimbabwe Economic Society’s September monthly meetings held virtually on Tuesday this week, MDC-Alliance vice-president and former Finance minister, Tendai Biti, said the SDRs money should be primarily invested into the economy.
“The government of the day . . . must avoid using the SDRs for recurrent expenditure. It will be dangerous to use these amounts for recurrent expenditure. In particular, they must avoid using the SDR to prop up the auction system. The auction system is now trading around US$48 million, US$50 million a week,” Biti said.
“That means that within a year, over a billion dollars is required for the auction system. But, as all of us know, the auction system has effectively become a subsidy to capital to investors because of the arbitrage between the parallel rate which is now around ZW$160 and the official rate, which is around ZW$82 or ZW$83 (currently ZW$86,21). So, effectively, there’s now a 100% premium between the patterns of exchange rate and the official exchange rate.
“So, it makes sense for someone or a dealer to go and purchase Zimbabwean dollars, Rtgs, on the black market and then go and use that to trade on the auction floor, hence, the deficit right now the difference is around US$200 million that the Reserve Bank has said it requires a month to clear that. This is arising out of the arbitrage. So, in other words, these hard-earned SDRs should not be used to fuel the arbitrage of the foreign exchange system.”
Instead, Biti said the SDR money should go to capital expenditure which has been less than 2% of the gross domestic product (GDP) over the past seven years.
The African Development Bank has previously stated that the country needs a minimum of US$2 billion in annual capital expenditure.
“In my respectful view, Zimbabwe’s most pressing demands are obviously around infrastructure. Infrastructure is accountable and it’s easier to account and it’s long term. The principle that I explained to you says you must balance between present generations and future generations when you are dealing with public finance,” Biti said.
“So, in summary, my point is very simple. Number one, let us welcome these amounts. Two, let us not politicise these amounts. They are not a vote of confidence in how the economy is being run, or more appropriately, how the economy is being mismanaged. Three, these amounts must be accounted for to Parliament through the national budget.
“Four, let us ring-fence these amounts against corruption; a lot of our compatriots have hands that stick and steal. Let us ring-fence these amounts against what I call a roving budget. Five, let us use these amounts for infrastructure.”
Another former Finance minister Herbert Murerwa called for the funds to be used to fuel the country’s productive sectors.
“We should treat this windfall in a strategic manner. We should ensure that it drives the anchors of the economy, the productive sector,” Murerwa said.
“But we should also be cognisant of the poverty issues, the safety nets and the need to begin to address those issues as the youth employment, as they address gender issues and so on because these will be critical human development issues that also are key to the development of our economy. I also have the view that certainly we should not use this windfall for consumption or for recurrent expenditure, except in a strategic manner, as I have indicated, but should be directed to the productive sectors and anchors of the economy.”
Ncube could not attend the webinar due to what he said were pressing national commitments.