THE International Monetary Fund executive board is expected to deliberate on Zimbabwe’s continued membership of the fund next month.
The review comes after the expiry of a sixth-month moratorium that the international financier had given Zimbabwe in February.
On February 16, the executive board deferred Zimbabwe’s compulsory withdrawal, providing Harare with another chance to strengthen its cooperation with the fund in terms of policy and payments.
The compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members who fail to meet their obligations under the Articles of Agreement.
Already Zimbabwe has lost its voting rights in the fund.
As of June 20, the country’s debt to the fund amounted to Special Drawing Rights 201 million (US$295 million).
Although the country has been making some payments to settle its debts, this has fallen far short of requirements.
On Monday the IMF issued a statement after the completion of its Article IV Consultations that projected a widening budget deficit.
“The authorities indicated their desire to address these problems by taking measures to contain further increases in the budget deficit,” the IMF said.
“The macroeconomic outlook is further clouded by the gravity of the food security situation and implementation of ‘Operation Restore Order’, which threatens to worsen shortages, contribute to lower growth and aggravate inflation pressures.”
The ensuing financing gap was largely funded from domestic sources contributing 99,9% of the required resources.
Of this total, $88 490 billion was sourced from non-bank domestic financing and $1 159 trillion from domestic bank credit.
The balance of the financing requirements of $11,3 million was from foreign sources.
The IMF said the magnitude of the economic problems facing the country called for a comprehensive policy package that should include decisive action to lower the fiscal deficit and tighten monetary policy.
The fund also called for the establishment of a unified, market-determined exchange rate.
“The package should also include structural reforms, such as the removal of administrative controls to ease shortages and restore private sector confidence,” the IMF said.
“A rebuilding of relations with the international community is a critical part of the effort to reverse the economic decline. We hope the authorities will work more closely with us to formulate and implement such a policy package which will help stabilise the economy and improve the welfare of the Zimbabwean people.”
During its visit from June 13-25, the IMF met with Finance minister Herbert Murerwa and central bank governor Gideon Gono.
The meetings focused on returning the economy to sustained growth, low inflation and improving the standards of living.
In its Monday report, the IMF forecast a further decline in output due to difficulties in the agricultural sector which have been exacerbated by drought and the intensification of foreign currency shortages.
The central bank has also revised this year’s gross domestic product from the initial 3-5% to 2-2,5%.
Zimbabwe cannot presently appoint a governor or alternative governor to the IMF board, or participate in the election of an executive director for the board.
On June 13, 2002 the IMF board adopted a declaration of non-cooperation with respect to Zimbabwe and suspended all technical assistance to the country.
A bank economist summed up the IMF’s comments saying: “The country’s fate with the IMF is hanging by a thread as it appears they have not seen any meaningful policy shift from the authorities.
“In fact, things have got out of hand since their last (December) visit,” he said.