via Govt misses IMF targets, again – Chinamasa | The Source March 26, 2014
Zimbabwe will miss targets set under the International Monetary Fund’s Staff Monitored Programme, as it fails to meet key benchmarks such as reducing the government’s wage bill, Finance Minister Patrick Chinamasa said on Wednesday.
Zimbabwe spends 70 percent of its budget on salaries, and Chinamasa said this would persist in the short- to medium term.
“It is clear at this stage that we have not been able to address some of the issues we discussed last year,” Chinamasa told journalists.
“I have told the (IMF) that with respect to employment costs (as a proportion of the budget), we cannot address those in the short to medium term. It is not something that we can address overnight, which would mean very drastic measures which I am not prepared to take.
“That would mean retrenchment of the civil service and so on. I proposed to them that I will address this in the long-term through creating growth in the economy, increasing the revenue base, GDP, so that employment costs can take their appropriate proportion within a bigger cake.”
In January, IMF extended the SMP by six months to allow the government to strengthen its policies and deliver on outstanding commitments.
Zimbabwe began the SMP last June but requested an extension after failing to meet the December timeline. If successful, the programme could help it clear over $10 billion in external debts and give it access to new credit from international lenders.
Chinamasa said the government has also not been able to make amendments to the Mines and Minerals Act and was still addressing legislative gaps on corporate governance in the financial services sector.
“I said the consultations will take time because I do not want to take measures before I have consulted widely, because (the legislation) must be able to last and must have the buy-in of the stakeholders in the financial services sector.
“So we are looking at amendments to the Banking Act to address issues. For instance, some of the banks…are guilty of insider loans so we need measures in the banking law to be able to prevent, and not to act post-factor.”
Chinamasa said he also need time to improve accountability and transparency in the diamond sector.
The next review will be in June and Chinamasa said he hoped to have made progress. The IMF has said it will reopen its Harare country office, nearly a decade after it closed it, signalling the thawing of relations with Zimbabwe.
The IMF restored Zimbabwe’s voting rights in 2010 after cancelling them in 2003 following Harare’s failure to service its debt.
Chinamasa said Zimbabwe had agreed to a ‘token payment plan.’
“We have no capacity to pay our obligations right now but the payments we are making are to show our commitment,” he said.