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Diamond revenue: Zimbabwe misses IMF target

ZIMBABWE has missed a June deadline to ensure diamond revenue from Marange flows into Treasury as part of reforms under a supervised programme by the International Monetary Fund (IMF).


This comes at a time the country has lost three months engrossed in election-related issues that had virtually paralysed government operations.

In June, the IMF agreed to a Staff Monitored Programme (SMP) on Zimbabwe after Harare had pledged to undertake a raft of reforms as it builds bridges with the multilateral financial institutions.

The SMP — an informal agreement between country authorities and the Fund staff to monitor the implementation of the authorities’ economic programmes — came after intensive lobbying by the inclusive government as part of its re-engagement with the global lender.

The SMP focusses on putting public finances on a sustainable course, while protecting infrastructure investment and priority social spending, strengthening public financial management, increasing diamond revenue transparency, reducing financial sector vulnerabilities, and restructuring the central bank.

As part of the agreement, Zimbabwe said it would issue a Statutory Instrument by the end of June 2013 that would establish a clear formula for the calculation and remittance of any dividends to government from those entities it holds shares in.

“This is an important step towards ensuring that all diamond revenue is remitted to Treasury, in keeping with the government’s commitment under the Diamond Policy. In addition, all rough diamonds produced shall be sold through a government-appointed agent,” Zimbabwe said in a letter to the IMF managing director, Christine Lagarde.

Marange diamonds had been central to the tug of war among partners in the coalition government whose tenure ended last month. The MDC formations accused Zanu PF of using diamond proceeds to build its war chest in the run up to the July 31 harmonised elections.

Former Finance minister, Tendai Biti complained during his tenure that Treasury was not getting enough from Marange diamonds despite producers increasing output.
Biti accused Anjin, a company in which a Chinese firm is partnering the Zimbabwe Mining Development Corporation, of not remitting dividends to the fiscus, an accusation the firm dismissed.

The measures on diamond proceeds stem from the Diamond Policy that was approved by cabinet last year giving Treasury and the Zimbabwe Revenue Authority the right to access trading and financial records of diamond companies.

The policy gave joint responsibility to the ministries of Finance and Mines and Mining Development to ensure the accurate computation, accounting and repatriation of diamond proceeds from companies in which government has a stake.

“On that basis, by end of June 2013, Treasury will produce a report accounting in detail for the diamond dividends, royalties and other diamond-related cash flows received in 2012 by Treasury from all enterprises in joint venture partnerships with ZMDC [Zimbabwe Mining Development Corporation] involved in the diamond industry,” government told the IMF.

The Statutory Instrument is still to be issued two months on raising concern on whether Zimbabwe will be able to undertake the reforms before the end of the SMP tenure in December.

There are now fears that other timelines would not be met.

Government also promised IMF that by the end of September, it would submit to cabinet amendments to the Precious Stones Trade Act to incorporate the principles contained in the Diamond Policy. The amendments would be presented to Parliament by end of December.

Government told IMF it will submit a Bill before Parliament by the end of the month meant to take over the debt owed by the Reserve Bank of Zimbabwe (RBZ).
The central bank owes creditors over US$1,1 billion.

The inclusive government had been working on the draft RBZ Debt Relief Bill but seems to have abandoned the project in the run up to the July 31 harmonised elections.

Questions sent to the IMF had not been responded to by yesterday. Treasury and the central bank said they were waiting for the appointment of a new finance minister to map the way forward.

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