IPS: ECONOMY-ZIMBABWE: Mixed Reactions To IMF's Funds Disbursement

[Robert Weissman <rob@essential.org>]

Title: ECONOMY-ZIMBABWE: Mixed Reactions To IMF's Funds Disbursement

By Lewis Machipisa

HARARE, Aug 3 (IPS) - Zimbabwe's protracted negotiations with the
International Monetary Fund (IMF) ended this week when the Fund
finally disbursed a new 14-month Stand-By Arrangement worth 193.1
million U.S. dollars.

While the funds have been widely welcomed in Zimbabwe, the
disbursement falls far short of what the country needs to
turnaround its ailing economy.

For more than a year, officials from the ministry of Finance in
Zimbabwe, had been shuttling between Harare and Washington to
secure the much needed funds without success.

The IMF had sought clarifications on who was funding Zimbabwe's
involvement in the conflict in the Democratic Republic of Congo
(DRC), and demanded the lifting of price controls by the
government.

Unconfirmed reports say Zimbabwe is spending up to two million
U.S. dollars a month in the DRC to back the government of
president Laurent-Desire Kabila against rebel forces. But this
figure has been rejected by government.

Zimbabwe's finance minister, Herbert Murerwa, said Tuesday the
approval of the funds is based on the Memorandum of the Economic
Policies of the Government as agreed with the IMF.

He told journalists in the capital Harare that the disbursement
of the funds ''...marks the beginning of a process that will see
the rebuilding of foreign exchange reserves as well as putting the
economy back onto a sound economic reform track.''

Murewa hopes to use the IMF money to bring inflation under
control, stabilise the exchange rate. Inflation reached an all
time high last month when it hit 55 percent.

Under the macroeconomic goals of the programme for 1999 as
contained in the letter of intent to the Fund, inflation should be
reduced to 30 percent by the end of the year.

Gross reserves are expected to increase to 1.6 months of
imports by the end of the year. At one time this year, import
cover was reduced to one-week cover which fueled speculation and
price increases.

While the disbursement of the funds is good news, local
economist Edmore Tobaiwa is somewhat cautious that the government
may still go down the road of fiscal indiscipline. ''We have
received such disbursements before...and we have nearly seen the
bottom of the abyss,'' he said.

Tobaiwa said most structures in government that have not been
performing are still in place. ''For example, privatisation (of
state corporations) has been at a painstakingly slow pace. There
is no guarantee that it will be expedited,'' he said.

Nhlahla Masuku, president of the Zimbabwe National Chamber of
Commerce (ZNCC) also welcomed the disbursement but with
misgivings.

Masuku says he fears the impact of the disbursement could be
insignificant and urged Zimbabweans to ''be masters of their own
salvation''.

President of the Zimbabwe Indigenous Business Development
Community (IBDC), Ben Mucheche, also welcomed the move but said it
falls far short of the country's requirements.

According to Tobaiwa, there is a need to reform government, its
way of doing business on a day-to-day basis.

''More meetings between Treasury, Reserve Bank of Zimbabwe and
Tax Department are crucial if economic fundamental targets are to
be met. There is need to monitor targets on a weekly basis as well
as inflows and outflows,'' he added.

Murerwa has assured the nation a tight fiscal stance will be
maintained, allaying fears the money will be channeled for the
upkeep of Zimbabwean soldiers in the DRC.

''Efforts to sustain prudent fiscal policies will be
complemented by the satisfactory progress made in resolving the
SADC Allied forces involvement in the DRC and current peace
initiative which will certainly translate into a reduction of
related expenses,'' Murerwa explained.

Zimbabwe, Angola, Namibia, all members of the Southern African
Development Community (SADC), have sent troops to the DRC to back
Kabila against the rebel forces.

Murerwa also said government has no intentions of imposing
widespread price controls.

''Price controls on maize meal were introduced as temporary
measures for socio-economic reasons and these will be removed once
the monopolistic and oligopolistic practices have been
addressed,'' he said.

Under this week's agreement between the IMF and Zimbabwe, there
will be four programme reviews by mid-November this year, and
February, May and August next year respectively.(END/IPS/lm/mn/99)