IMF blames govt policies for economic failure

The International Monetary Fund (IMF) said on Friday "inappropriate" policies, corruption and the government's human rights record had contributed to Zimbabwe's continued economic decline. "Concerns about governance, the rule of law and human rights, and the continued lack of clarity about property rights have severely damaged confidence, discouraged investment, and promoted capital flight and emigration, thus contributing to the economic decline," the IMF said in a report summarising discussions of its Executive Board. The Fund's directors "expressed grave concern over the continued sharp economic decline and high inflation in Zimbabwe, which are having dire consequences for the country’s population¯notably rising unemployment and the rapid deterioration of social indicators". It regretted that a "cycle of malnourishment and disease has developed, and that the sharp fall in agricultural production has led to continued food insecurity, while one in four adults is HIV-positive". The report, based on findings by an assessment team which visited Zimbabwe a few months ago, noted: "[IMF] Directors saw the crisis as resulting mainly from inappropriate macroeconomic and structural policies, including weak financial management, distortionary controls and regulations, and the disorderly implementation of the fast-track land reform." Last year real GDP fell by 9.3 percent, and another broad-based decline is projected for 2004. Year-on-year inflation reached 600 percent during November 2003 to February 2004. Reducing inflation should be the authorities' main priority and the Fund called for a "sustained" tightening of monetary policy. The foreign exchange system continues to be affected by "distortions caused by government interventions and burdensome surrender requirements" and the IMF urged the introduction of an exchange rate that would "fully reflect market factors". It also recommended the removal of impediments to food security, including "replacing the monopoly of the Grain Marketing Board with well-targeted basic food subsidies". The IMF directors regretted the government’s decision to abort a crop assessment prepared together with the World Food Program as "it leaves Zimbabwe without a basis for a timely appeal for food aid, with serious humanitarian consequences should the crop fall short of the government’s ambitious estimates". The Fund "advised the authorities to pursue anti-corruption efforts more vigorously by focusing closely on the roots of corruption, namely the numerous economic distortions that provided rent-seeking opportunities, rather than on its symptoms". But Anti-corruption and Anti-monopolies Programme Minister Didymus Mutasa told IRIN that, as far as he was concerned, the government had made substantial strides in addressing the issue of corruption. "I think they [the IMF] are largely concerned about us not having acceded to the UN protocol on corruption yet, but as government we can safely say we have covered a lot of ground in stemming corruption. We are also in the process of following up on other high-profile cases of corruption and at the moment we are forming an anti-corruption commission that will work together with the ministry. We will leave no stone unturned," Mutasa said. Zimbabwe has been in continuous arrears to the Fund since 2001. In July the IMF gave Zimbabwe six months to demonstrate a commitment to resolve its "overdue financial obligations" or face expulsion. As of end-June 2004, its arrears to the Fund amounted to almost US $295 million.