IMF demands economic and political reforms

The International Monetary Fund (IMF) has said that President Robert Mugabe’s government would have to implement “orderly and transparent” economic and political reforms before it could resume financial support programmes. Paulo Neuhaus, the IMF Assistant Director of the African Department, said in a statement on Tuesday after a three-week mission to assess the economy that only “clear progress over the next few months” could lay the groundwork for “subsequent resumption of programme discussions with the IMF staff”. He said the IMF team had met several ministers, including new Finance Minister Simba Makoni, Central Bank Governor Leonard Tsumba, business and civic society leaders and officials from donor countries. Neuhaus said his talks focused on fiscal, monetary and exchange rate measures needed to contain inflation, reduce state spending and eliminate severe foreign exchange shortages. Zimbabwean economists have told IRIN they expect inflation to reach 70 percent by the end of the year, up from some 50 percent in June. “The mission noted with concern the rapid deterioration in the country’s economic and social situation, and urged the government to quickly address the macroeconomic imbalances and create an environment that fosters economic growth,” the statement added. “The mission urged the authorities to formulate and secure parliamentary approval of a budget for 2001 that targets a substantial reduction in the overall government deficit while protecting social programmes.” It said fiscal consolidation supported by tight monetary policy would help reduce inflationary pressures and release resources for a recovery in private sector activity. The IMF and other key Western donors, including the World Bank, suspended aid to Zimbabwe a year ago over Mugabe’s management of the economy and various of his policies. They also cited Zimbabwe’s involvement in the war in the Democratic Republic of the Congo (DRC), the controversial campaign to seize white-owned farms for black resettlement without compensation, and intimidation of political opponents by the ruling ZANU-PF party. At least 31 people, mostly members of the main opposition Movement for Democratic Change (MDC) and five white farmers, were murdered ahead of parliamentary elections in June which ZANU-PF narrowly won. A restoration of economic stability, the IMF said, would require addressing governance issues to rebuild investor confidence in Zimbabwe, as well as a normalisation of relations with international creditors. “In light of these considerations, the mission shares the view that land reform in Zimbabwe should be implemented in an orderly and transparent manner to garner domestic and international support and to minimise the potential for large losses in agricultural output, employment and export earnings in the near and medium term,” the IMF said. It said the IMF would follow up its meetings in Harare with the Zimbabwean officials at the IMF annual meetings in Prague later this month.