IMF US$961m Zim package – Mat’land region projects set to benefit from funding
Treasury has crafted a draft budget to guide usage of the US$961 million received on Monday from the International Monetary Fund (IMF), which would be channelled towards key strategic economic focus areas.
oing capital projects in Matabeleland region are part of the top priorities under the infrastructure focus, alongside the need to boost the productive sectors of the economy, social services development and supporting domestic currency and the wider macro-economic stability, a top Treasury official said yesterday.
The Bretton Woods institution, to which Zimbabwe is a member, deposited the SDR677,4 million, which is equivalent to US$961 million into the Reserve Bank of Zimbabwe (RBZ) account with the IMF for value on August 23.
This is pure liquidity injection into the economy as opposed to a loan, and was disbursed under the multi-lateral organisation’s US$650 billion SDR allocation earmarked to provide additional liquidity to the global financial system.
Government, with concurrence from key economic actors, have expressed excitement over the timely injection, which is expected to boost the momentum towards realisation of targeted transformation under the National Development Strategy (NDS1-2021-2025) blueprint, a critical step towards attainment of Vision 2030.
In the context of Second Republic’s drive to transform Matabeleland region and revamp manufacturing industries, Deputy Finance Minister Clemence Chiduwa said the ongoing infrastructure projects in the region were under critical focus.
“The SDRs are going to focus mainly on four areas and infrastructure development is one of them. So, we are going to put resources there and already we have a draft budget showing how much we are allocating to each area,” said the Deputy Minister.
“If you look at Matabeleland, we have the Gwayi-Shangani Dam (Hwange), TuliManyagwe Dam (Gwanda) and other irrigation infrastructure related projects.
“We are also looking at reviving productive value chains and capitalisation is definitely part of our focus. We have got a strategy of promoting the productive value chain system and domestic beneficiation of our mining and agricultural produce.”
The Lake Gwayi-Shangani project is set for completion by December this year and is a key high-impact regional project with implications on irrigation development, water, food and nutrition security and industrial operations in Bulawayo, the country’s manufacturing hub.
Government is also championing energy and power development projects in Matabeleland North Province as well as road rehabilitation and social service infrastructure development such as hospitals, schools and housing.
“The fresh funding would, thus, go a long way in boosting the overall economic operations,” said Finance and Economic Development Minister, Professor Mthuli Ncube, and RBZ Governor, Dr John Mangudya, in a joint statement.
“The immediate impact of this support from the IMF is to increase the foreign exchange reserves position of the country by US$961 million. This will go a long way in buttressing the stability of our domestic currency.
“The funds will be used prudently, with utmost accountability, to support the social sectors namely health, education, and the vulnerable groups; productive sectors that include industry, agriculture and mining, infrastructure investment covering roads and housing; and foreign currency reserves and contingency fund, to support our domestic
currency and macro-economic stability.”
Government has since expressed greatest appreciation to the IMF for the disbursement, which it has pledged to use in a transparent manner in line with the IMF guidance note.
In separate interviews, business leaders also hailed the IMF package, which they said will support the country’s economic transformation trajectory from the background of dampening Covid-19 period.
“The SDR is without a doubt important to all businesses. The plans laid out by the Minister of Finance indicate that the manufacturing and business are part of the priority list to benefit from this fund,” said Mr Victor Nyoni, chief executive officer of the Association for Business in Zimbabwe (Abuz).
“We urge the minister to clearly spell out the access modalities for the SDR funds by the business. We have in the past been disappointed by such pronouncements when we later discover from our banks that such funds are inaccessible for whatever reasons.
“So, if the minister can deal with this, we are good to go. The cost of money in Zimbabwe is currently too high and businesses are unable to borrow from banks. We believe the SDR will go a long way to help the Zimbabwe economy grow.”
Bulawayo businessman and economics researcher, Mr Dumisani Sibanda said Treasury must urgently deploy the funds towards stabilising the exchange rate by tackling demand for forex.
“Public works are exerting pressure on the exchange rate. The foreign content on road repair and new construction is increasing demand for foreign currency,” he said.
“Maintenance programmes on Government infrastructure is adding on the demand for foreign currency. The country is import dependent. On roads maintenance and construction tar and other materials are imported. The same applies to other maintenance programs.
“The imports pressure on foreign currency demand is exacerbated by lack of confidence in the local currency. That is, its ability to hold value is not trusted. Citizens prefer to convert local currency to foreign currency.”
Mr Sibanda said the backlog on the auction has been a concern hence some traders resort to the parallel market when they cannot access their bids efficiently. He hoped that the SDR would support the strength of the local currency.
“The supply of forex does not meet demand. It would be useful and beneficial to the wider economy if part of the SDR is used as a facility to expand generation of exports.
Some import substitution would help to manage the unfolding currency crisis,” said Mr Sibanda.
Business analyst, Mr Morris Mpala said the IMF package was timely given that it comes as zero-cost to the economy.
He implored the Treasury to use the funding to resuscitate industries via the official auction by increasing allocations to companies.
“We need to target high impact development projects such as Gwayi-Shangani Dam as it has a lot of agricultural potential,” said Mr Mpala.
“Use this fund to also drive high impact developmental private projects and not pay debts. We need to channel it towards developmental projects . . . and address fundamentals that are detriment to our economy.”
According to financial economist Mr Collet Ndlovu, the value of the SDR allocation to any country is based on a weighted average of a basket of key international currencies reviewed by IMF every five years. These include the British Pound, US-dollar, Chinese Renminbi, Japanese yen and the Euro.
The principle has its roots in the 1944 Bretton Woods peace talks and was formally adopted by the IMF in 1969.-chronice.cl.zw
