Crucial IMF assessment will put membership in the balance

A meeting between Zimbabwe and the International Monetary Fund (IMF) this week could prove crucial to overcoming the country's deepening economic crisis, analysts said on Monday. Although the authorities have downplayed the significance of the Fund's latest visit to Zimbabwe, calling it a "routine" assessment, economists have argued that it was probably one of the last opportunities Harare would have to convince the Fund not to expel it. "I cannot say much, except that they will be looking at how the country is resolving the current economic challenges," Finance Minister Herbert Murerwa told IRIN, adding that the government had agreed to implement "some measures" during the Fund's visit in May 2005. The IMF has already initiated procedures to strip Zimbabwe of membership over arrears to the tune of $295 million and its failure to rein in public spending. If Zimbabwe is expelled, it will be the first country to have been kicked out since 1954. The executive board will make its decision on 9 September. South Africa has agreed "in principle" to step in with a loan to ensure that its neighbour retains IMF membership, but Zimbabwe has not yet said whether it will accept the offer. Harare-based economist Denis Nikisi remarked, "It is crunch time for the government. The IMF is probably expecting to get some clarity on whether Zimbabwe will accept the loan or not - but that in itself is a complicated issue, because the government has been firm that it will not accept any loan that comes with stiff political conditions." South Africa has reportedly demanded constitutional and political reforms, such as the repeal of repressive laws, freeing the media and restructuring the economy, in exchange for the bailout worth around US $500 million. Nikisi added that the IMF delegation would want to see evidence of some sort of economic recovery plan, which would form the basis for continued financial aid to the country. "The government has been scrambling to create a positive image of the country before the 9 September deadline - last week Murerwa introduced a supplementary budget, but also raised taxes and cut spending," he noted. "But whether or not it is enough to placate the IMF is still to be seen." Chris Maroleng of the Pretoria-based Institute for Security Studies said although Murerwa had the unenviable task of trying to manage Zimbabwe's ailing economy, his policy interventions had so far failed to address the "fundamental shortcomings". "Essentially, Murerwa has tried to clean up Zimbabwe's economic image but has only tinkered with the problem. The IMF is likely to see right through this - the real problem behind Zimbabwe's economic difficulties is poor governance and economic mismanagement." A report released earlier this month by the Washington-based Centre for Global Development said Zimbabwe's economy had contracted to 1953 levels. The price of goods and services rose by at least 47 percent in July, the highest increase ever recorded in the country, while the shortage of forex has been blamed for large numbers of business crashes and the dramatic increase in the price of fuel.