Zimbabwe Finance Minister Tendai Biti Gives In On IMF Funds

Zimbabwe Finance Minister Tendai Biti has now asked the IMF to urgently release US$50 million to fund requirements for the 2009/2010 agricultural season, basically caving in to pressure from Mugabe's ZANU PF. It is also an indication that Zimbabwe is in big trouble, because the season (which informs the April 2010 harvest) has already advanced so far that the money will not make a difference at all. Biti has also outline how he wants the rest of the US$510 million from the IMF to be used and this is basically the same plan as presented by Gideon Gono, Governor of the Reserve Bank and Biti's nemesis.

Harare, Zimbabwe, 27 November 2009

Zimbabwe's Finance Minister has given in to pressure from ZANU PF and instructed the International Monetary Fund to "urgently" release US$50 million of the US$500 million allocated to Zimbabwe a couple of months back to help the country withstand the global economic slump.

In addition to the "urgent" disbursement, Biti has also outlined how he wants the rest of the IMF funds to be used and his plan bears a striking resemblance to Gideon Gono's original plan for disbursing the IMF Special Drawing Rights (as the IMF currency is called).

Biti had previously blocked the release of the money by the IMF, saying that his action had "prevented wholesale looting" of the funds by elements of the Government who had already started salivating at the prospect of the bounty.

The plan he has outlined raises the question of whether the same circumstances do not apply, especially considering that he has recommended what Gono was advocating in his original letter to the IMF, which the Minister asked the Bank to ignore and take instructions only from his office.

Gideon Gono, the Reserve Bank of Zimbabwe Governor, had written to the IMF instructing them on how the money was to be disbursed, including settling Zimbabwe's arrears with the Bretton Woods Institution.

At the time, Gono provoked Biti by publicly stating that he was the "custodian and disburser" of the funds from the IMF.

Biti now wants the IMF to release US$50 million urgently in  order to finance the current agricultural season. It is late in the day for him to do this, of course. Fertiliser, especially, is non-existent in Zimbabwe at the moment, although seed (especially maize seed) has been adequately supplied.

The decision by the Minister is an admission that Zimbabwe faces a disastrous season. It comes too late to salvage anything and time will prove this to be true.

The breakdown of Biti's proposal to the IMF is as follows:

  • US$250 million to clear certain IMF arrears, demonetisation, and other 2010 National Budget projects
  • US$105 million for rehabilitation of Hwange, Zesa, National Railways, hospitals, the education sector, roads, water and sanitation projects, and lighting

  • US$50 million for grain procurement lines of credit

  • US$100 million for manufacturing, mining, agro-processing, construction, transport and ICT lines of credit

It is certainly commendable that he has now decided to use the money in this money and it is to be hoped that the disbursements will go some way towards creating employment and finally setting Zimbabwe on a path to growth as opposed to recovery.

It is also an indication that the MDC-Tsvangirai are not serious at all about leaving the Inclusive Government should their demands from Mugabe and ZANU PF not be met.

Biti is planning on being Minister of Finance for some time yet and as Secretary General of the MDC-T, he should know more about the threats of his party to withdraw from government than most of us do!

Mugabe has known this all along, I suppose, which is why is not stampeding himself into meeting SADC deadlines or meeting MDC-Tsvangirai requests on outstanding issues in this coalition government.

We may yet be surprised, but I put by bottom dollar on the prediction that the disbursement of this money will NOT have an impact at all on the economy. There are no policies in place to guide the effects of the money in the economy. There is no framework designed to use the money as a shot in the arm for Zimbabwe's economy.

Like ZANU PF, it has been clear for a long time now that the MDC-T solution to our problems is : "Throw money at the problems and they will go away."

Another important note to make: the government-owned companies that will also benefit from these funds are still in the hands of ZANU PF appointees. They know the power that their party over the MDC-T and Morgan Tsvangirai. They have previously thumbed their noses at parliament and the Reserve Bank (which used to give them money) by refusing to publish their accounts.

Although parliament requested on several occasions for audited accounts from these government-owned companies, they have simply ignored those calls.

This will not change. I suspect that the money will be taken and used to buy luxury vehicles and gives perks to their people and cronies. Should parliament or Treasury (Ministry of Finance) ask for an accounting of the funds, the companies will simply run and hide behind ZANU PF's skirts.

And because ZANU PF politicians also benefit from these companies, they will turn around and confront those asking awkward question.

And that will be the end of that. 

Of this, I am certain and we will talk again this time next year.

By the way, the "demonetisation" item mentioned in Biti's breakdown refers to the amount of money needed to liquidate the Zimbabwe dollars that are still in the bank accounts of countless Zimbabweans. I told you earlier this year that a formula had been agreed to for settling these outstanding balances by converting them into US dollars or Rand, basically creating a lot of money in the system out of nowhere.

When that happens, you will almost certainly see a jump in Zimbabwe's inflation (in US dollar terms) because you can not create money out of  thin air and expect that it will have no consequences on inflation.


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