IMF to help Zim draw mid-year budget
IMF to help Zim draw mid-year budgetBy Kingsley Kaswende in Harare
Wed 15 June 2011, 11:40 CAT
AN international Monetary Fund (IMF) team is set to arrive in Zimbabwe today (Wednesdaay) to help the coalition government to come up with a mid-year budget statement. According to the Fund’s external relations department, the team will be led by mission chief Vitaliy Kramarenko.
“The objective of the mission is to review recent economic developments and assist the government in the preparation of the mid-year budget statement,” stated IMF press officer in the department, Alistair Thomson.
The mid-year statement will chart the way forward for the economy, which risks failing to meet its targeted growth due to uncertainties caused by the empowerment regulations, according to an assessment by the IMF executive board.
The country’s economy grew by nine per cent in 2010, according to IMF figures.
This year, the IMF estimates that the country’s economy will decelerate to 5.5 per cent on the back of “an inefficient composition of expenditure, rising vulnerabilities in the financial system, and the recent announcement of the fast-track indigenisation of the mining sector.”
However, finance minister Tendai Biti recently estimated that the country’s economy will grow by 9.3 per cent at the end of 2011.
Kramarenko's team comes at a time when there are two other IMF missions on the ground, providing technical assistance that resumed in 2009 when the coalition government was established. The IMF had suspended technical assistance on Zimbabwe for seven years due to the country’s debt service defaults as it went through a depression.
In restoring the technical assistance support in 2009, IMF said it had taken into account “a significant improvement in Zimbabwe's cooperation on economic policies to address its arrears problems and severe capacity constraints in the IMF's core areas of expertise that represent a major risk to the implementation of government's macroeconomic stabilisation programme.”
The IMF executive board last week said Zimbabwe’s main fiscal challenge is to create space to tackle pressing social and infrastructure needs and to increase economic resilience to shocks.
“In the short term, it is important to return to cash budgeting and implement strong expenditure measures, including elimination of ghost workers, aimed at closing the likely financing gap. Over the medium term, generating fiscal surpluses would help raise international reserves and increase resilience to shocks. To meet these challenges, Directors highlighted the need for reducing the wage bill relative to revenues, tightening the budget constraint on state-owned enterprises, and implementing public finance management reforms,” the Board said.
But this piece of advice clashed with opinions of the leaders of the coalition government, who directed the finance minister to “find money” to increase salaries of civil servants, who are planning a crippling strike on June 21.
Zimbabwe cannot get lines of credit from IMF until the country clears the US$141 million debt under the Poverty Reduction Growth Trust.
[Or the Zimbabwe Democracy and Economic Recovery Act of 2001 is scrapped. From ZDERA:
SEC. 4. SUPPORT FOR DEMOCRATIC TRANSITION AND ECONOMIC RECOVERY.
(c) MULTILATERAL FINANCING RESTRICTION- Until the President makes the certification described in subsection (d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against--
(1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or
(2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.
SEC. 3. DEFINITIONS.
In this Act:
(1) INTERNATIONAL FINANCIAL INSTITUTIONS- The term `international financial institutions' means the multilateral development banks and the
International Monetary Fund.
So through ZDERA, the IMF is literally banned from accessing lines of credit through the IMF. - MrK
The country has agreed to pay quarterly payments towards settling the debt and increasing payments over time as the country's payment capacity increases.
But the Fund warned of rising vulnerabilities in the banking system and said the restructuring of the Reserve Bank of Zimbabwe (RBZ) and strengthening of prudential regulations and their enforcement to contain liquidity, solvency, and credit risks must be the priority.
“These steps will help mitigate financial sector vulnerabilities and ensure the medium-term viability of the multi-currency system,” it said.
Confidence in the banking sector fell once again recently after problems at a local bank, ReNaissance Bank, where directors abused depositors' funds and prudent corporate governance was disregarded.
IMF has two other missions in the country as part of its technical assistance to build its capacity.
There is a technical assistance mission on tax administration which started on May 31 and will be running up to June 3.
Its brief is to review the status of tax administration reforms and make recommendations to update the reform and modernisation strategy.
There is also a technical assistance team on public finance management, which started on Tuesday and runs up to June 17.
“The objective of the mission is to strengthen the fiscal reporting and oversight of public sector,” IMF stated.
Labels: IMF, NEOLIBERALISM, TENDAI BITI, ZIMBABWE
posted by MrK @ 4:14 AM
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