IMF tells Zimbabwe to demonstrate fiscal discipline to unlock funding

Zimbabwe should clarify its foreign ownership law and demonstrate fiscal discipline by next year to unlock financial support from international financiers, International Monetary Fund country representative Domenico Fanizza said today.

Zimbabwe in June last year undertook an IMF staff monitored programme (SMP), an informal and flexible instrument for dialogue between the Fund staff and a member country on its economic policies.

Although Zimbabwe missed key SMP targets, especially the reduction in its wage bill which is taking up three quarters of total revenues, the IMF expressed broad satisfaction with Harare’s commitment to the re-engagement, which was resumed after more than a decade of frosty relations. The IMF has also cajoled government to increase infrastructure and social spending.

Speaking at a joint press conference with Fanizza, Finance Minister Patrick Chinamasa said the IMF management had already approved the second SMP, which will run for 15 months, subject to a nod from the IMF board.

An IMF mission is in the country from September 17 to October 1, 2014 to conduct the third and last review under the first SMP and to hold discussions on the proposed second installment.

Approval from the board is expected in November but Zimbabwe has to rebalance its expenditure to include infrastructure and social spending, among the key benchmarks in the new SMP.

Fanizza said the second SMP would be a useful vehicle to mobilise financial support to clear arrears for the country’s nearly $10 billion external debt.

“First of all, I would say that clarify the indigenisation and economic empowerment laws. It’s a key measure that authorities intend to take. This clarification would go a long way towards allaying perceptions on the security of the investments and property rights and re-assure markets of government’s open invitation to invest in Zimbabwe,” said Fanizza.

“Secondly, the authorities intention to eliminate fiscal deficit without putting and taking into account interest payments by end of 2015 which gives us a strong message that Zimbabwe is going to live within its own means.”

He said treasury should improve public financial management by improving transparency in state procurement and create more fiscal space for infrastructure projects and social spending.

Commenting on the financial sector, Fanizza said treasury and the Reserve Bank of Zimbabwe should work on restoring confidence of the sector.

The first SMP, he said had met all the ‘quantitative targets and structural benchmarks that were set for end of June in order to monitor reform progress.’

“I think this is good news and it is a sign that the authorities are serious to move forward. We welcome this result,” Fanizza said.

Chinamasa said the government is keen on keeping its wage, which now accounts for 76 percent of revenues, under check. He did not elaborate, but he has previously said government was unlikely to reduce its 235 000-strong workforce despite IMF pressure.

“We are going to work very hard to make sure that we reduce the level of the wage bill and we are going to have to consider various options that we need to adopt as Cabinet to see that the wage bill  goes down,” said Chinamasa.

“I am happy to say that I have already started discussions on this issue with my colleagues informally first before this matter comes to cabinet,” he added, and urged government employees not to make ‘unreasonable demands’ on wages.

On the empowerment law, Chinamasa said he had ‘moved mountains,’ and that the edict would be implemented on a case by case basis.-The Source

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