(Fwd) More on Zim acquisition by IMF (fwd)

[Robert Weissman <rob@essential.org>]

News analysis: Zimbabwe now a wholly-owned subsidiary of the IMF:

Sunday Independent, 8/6/99
DRC gobbles US$3m a month 

Barnabas Thondhlana

ZIMBABWE'S military involvement in the Democratic Republic of Congo is
costing the country US$3 million a month, Finance Minister Herbert
Murerwa has told the International Monetary Fund.

Despite government's persistent assertions that the DRC expedition had
made no dent in the country's fiscus, Murerwa, in his memorandum
submitted to the IMF (see Page 39), has suggested otherwise, although
he downplayed the cost.

"The DRC is covering the bulk of the cost of our military involvement
in the DRC, which includes fuel, transport and ammunition. The outlays
borne directly by Zimbabwe's budget were limited to US$1,3 million per
month in 1998, or 0,4% of the Gross Domestic Product at an annual
rate," Murerwa said.

"Because of the deployment of additional troops, outlays for the DRC
campaign will rise to US$3 million per month in 1999, or 0,6% of GDP."
Government, which for the past year has been trying to get the IMF to
release the much-needed stand-by arrangement and balance of payments
support for the country, had been asked by the Bretton Woods
institution to explain a number of problem areas before the funds
could be released.

Among them was the land question, government's involvement in the DRC,
price controls, the controversial YTL/Zesa Hwange project and
government spending.

Murerwa's figures show that government has spent a total $1 billion in
the Congo war to date. One of the conditions set by the IMF for the
release of funds was for the cabinet to fully endorse the undertakings
by appending their signatures, and to make the letter of intent
public.

The IMF on Monday approved the release of $7,32 billion to Zimbabwe to
support the nation's economic recovery programme over the next 14
months. Of the total, US$24 million ($910,8 million) is immediately
available, with a further US$9,7 million ($368 million) being made
available after August 16, 1999. Subsequent quarterly disbursements
will be made available on the basis of Zimbabwe's meeting performance
targets and the completion of programme reviews.

In a statement, IMF deputy managing director Shigemitsu Sugisaki said
the immediate challenge to Zimbabwe was to stabilise the exchange rate
and bring inflation under control through a further tightening of
financial policies. The restoration of market confidence was central
to this effort, and steps being taken toward the early removal of
price controls and trade and exchange restrictions were welcomed by
the IMF.

"Directors stressed that strong and sustained commitment and broad
consensus on economic reforms will be critical to re-establish the
conditions for enhanced growth, address unemployment and poverty
issues, and set the stage for the provision of broader support from
the international financial co- mmunity," Sugisaki said.

He also emphasised the importance of strong implementation of the
stand-by arrangement and significant progress in adopting structural
reforms to establish the basis for discussion on an Enhanced
Structural Adjust- ment Facility (ESAF).

Under the agreement, there will be four programme reviews by November
14, 1999; February 14, 2000; May 14, 2000 and August 14, 2000. 

The first review will focus on the guidelines for dealing with
troubled banks and an assessment on the viability of reopening
forward-cover contra- cts. It will examine progress in implementing
civil service reforms, preparing for the National Revenue Authority
and introduction of Value Added Tax and moving ahead with trade
liberalisation. An updated examination of the financial position of
the largest parastatals will also be undertaken at that time. Murerwa
said government had set out in its macro-economic program-me the
achievement of real GDP growth of 1,2% in 1999, reduction of inflation
to 30% by the end of the year, and an external current account deficit
of 6,3% of GDP, which together with additional external financing
should allow gross reserves to increase to 1,6 months of imports by
the end of the year. He said with the support of the donor community,
government would implement a two-year inception phase of the Land
Reform Programme. The programme will involve fully transparent
procedures governing land acquisition, Murerwa promised, and the
payment of fair compensation for land acquired. The government was not
proceeding with the Hwange power plant privatisation and extension
programme in its present form, Mure-rwa told the IMF. "The project is
currently under review with the aim of concluding arrangements with
investors that are economically and financially sound for Zimbabwe,"
he said. The minister told the IMF that the exchange rate would be
determined by market forces, with the Reserve Bank of Zimbabwe
intervening only to smooth out fluctuations and achieve its
international reserve objectives. 

Major tariff liberalisation would be a primary focus of the reforms
and foreign currency accounts, which were frozen after the fall of the
dollar in 1997, would be re-introduced in stages. 

Price controls on maize-meal will be removed by the end of the year,
Murerwa said, providing a forthcoming World Bank report did not
identify any widespread oligopolistic practices.

The IMF has called for greater flexibility in the setting of petrol
and electricity prices and said it supported government's goal of
removing price controls on maize meal.

"Attracting new foreign investment was crucial for promoting economic
growth and poverty alleviation, and much could be done to improve the
environment for private investment. The benefits of privatisation of
para-statals in strengthening public finances and raising economic
efficiency are particularly underscored," Sugisaki said.