Maravi

IMF happy with Zimbabwe's economic reforms

IMF happy with Zimbabwe's economic reforms
Written by Kingsley Kaswende in Harare
Wednesday, April 29, 2009 6:53:24 AM

The International Monetary Fund (IMF) has said it is impressed with the economic reforms currently underway in Zimbabwe, courtesy if the newly established inclusive government.

Director of the African Department at IMF’s Sub-Saharan Africa Regional Economic Outlook, Antoinette Sayeh, told a press conference on the sidelines of the IMF/World Bank spring meetings in Washington that the country was making some positive reforms.

She was responding to a question over what the IMF had worked out in Zimbabwe in order to mitigate the impact that the country was having on its neighbours in the midst of the global financial crisis..

“In Zimbabwe specifically, there are some encouraging developments, as you know, coming out of the agreement earlier this year to put in place a coalition government,” she said

“The actions taken recently by the government in Zimbabwe are encouraging. We think hyperinflation has been stopped by the decision to use the (South African) rand and the US dollar. And the formal recognition and formal decision to dollarize, as we call it, to use external currency as domestic currency, has helped to put a stop to the quasi-fiscal deficit.”

Sayeh also praised the action by the Zimbabwean government to divorce the central bank from quasi-fiscal activities, which she said had been the main reason spurring hyperinflation.

“And so the central bank's ability to just finance and print money to finance expenditures outside of the budget which have been a large source of the hyperinflation in Zimbabwe, that's now at an end, we think, which is a good thing. And that's already resulted in a decline in prices in Zimbabwe, more availability of goods in country, and we are certainly encouraged by that. So, in the very recent past developments in Zimbabwe have been broadly positive,” she said.

She said there was a “window of opportunity in Zimbabwe” that is worthy of support by the international community.

“We, for our part, are hoping to help in the ways we can currently, and those are mostly through policy advice, our Article IV discussion with the authorities was one form. We're hoping to do some small, technical assistance in the key areas of the Fund's mandate, and we encourage others to do the same. And we'll work with the Zimbabwean authorities to continue to make progress on the reform effort,” she said.

Zimbabwe is trying to recover from years of economic decline, which, according to IMF figures recorded an estimated 14 percent fall in real Gross Domestic Product in 2008, on top of the 40 percent cumulative decline during 2000-07. Poverty and unemployment rose to about 90 per cent.

Against the backdrop of the acute economic and humanitarian crisis, the recently-formed inclusive government has launched a Short-Term Emergency Recovery Program (STERP). This program focuses on macroeconomic policy and supply-side measures aimed at achieving low inflation, arresting economic decline, and improving social conditions.

In March, following the establishment of the inclusive government, an IMF mission led by Vitaliy Karamenko visited Zimbabwe to conduct Article IV consultation discussions.

Sayeh said the report that followed this assessment would be discussed by the IMF board next week, on May 4.

Following that assessment, the IMF welcomed Zimbabwe’s commitment to recovery under

STERP along with the elimination of quasi-fiscal activities by the Reserve Bank of Zimbabwe (RBZ), and the implementation of cash budgeting in 2009.

“Making further progress in structural reforms is essential for reviving economic growth and reducing poverty. A number of positive steps that are in line with previous IMF recommendations have already been implemented, including price liberalization, the removal of surrender requirements and most exchange restrictions on current account transactions, the imposition of hard budget constraints on parastatal enterprises, and the elimination of the Grain Marketing Board monopoly.. Going forward, strengthening the investment climate, ensuring protection of property rights, and maintaining wages at competitive levels will all be essential for increasing domestic and foreign investment,” Karamenko noted in a statement.

IMF also lauded the official adoption of hard currencies for transactions, which strengthened the credibility of the government’s commitment to fiscal discipline and helped stop hyperinflation.

However, the IMF emphasised effective oversight of the RBZ, which it accused of spurring hyperinflation from its quasi-fiscal operations in recent years.

“Specifically, the accountability of the RBZ needs to be enforced in conformity with the RBZ Act, and transparency of its operations needs to be strengthened. Moreover, the RBZ needs to refrain from quasi-fiscal operations, as in recent weeks, and focus on core central bank activities,” an IMF statement reads.

The IMF stated that its staff stood ready to continue to assist Zimbabwe through policy advice but technical and financial assistance from the IMF would depend on establishing a track record of sound policy implementation, donor support, and a resolution of overdue financial obligations to official creditors, including the IMF itself.

Finance Minister Tendai Biti was in Washington, DC, at the weekend for the IMF/World Bank spring meetings where he was lobbying for funding for STERP.
He also lobbied for the reinstatement of the country’s voting rights suspended in 2003 by the IMF.
Zimbabwe needs about US$8.3 billion to revive its economy.

Labels: IMF, NEOLIBERALISM, ZIMBABWE

posted by MrK @ 5:55 AM