GOVERNMENT has said it will continue working with international financial institutions (IFIs), including the International Monetary Fund (IMF) after its aborted Staff-Monitored Programme (SMP) with the Bretton Woods institution.
In a wide-ranging interview, Finance minister Mthuli Ncube said it will work with IFIs to enable it to come up with the right policy mix for the country.
“Government continues to work to address economic challenges to promote stability using homegrown solutions wherever possible,” Ncube said. “We are also working closely with development partners, including the IMF, WB (World Bank), AfDB (African Development Bank), amongst others, for provision of technical assistance and guidance on international best practices which enable us to come up with the optimal policy mix for the country.”
The IMF revealed in a report on its 2020 Article IV Consultation with Zimbabwe, following its board meeting in Washington earlier this year, that the SMP, which was adopted in May last year, is now “off track” after government’s failure to meet set targets.
“The government that came into office following the 2018 elections adopted an agenda focussed on macro-economic stabilisation and reforms. This was supported by a Staff-Monitored Programme from the IMF, adopted in May 2019, but is now off track as policy implementation is mixed,” the Bretton Woods institution noted.
Ncube revealed that government will continue to work towards the repayment of its debts to IFIs. The country has an external debt of just over US$8 billion.
“Government is continuing with token payments to settle the country’s foreign debt obligations,” Ncube said.
He pointed out that reforms of state-owned enterprises and parastatals (SOEs) are being accelerated as outlined in the 2020 National Budget.
“Having approved the implementation framework for 43 SOEs and parastatals in 2018, government has targeted five public enterprises, namely TelOne, NetOne, Telecel, Zimpost and POSB for immediate reforms and work is already underway to identify transaction advisors. Projections are that government will realise at least US$350 million from this initial process,” Ncube revealed.
“In addition, turnaround strategies for at least 20 public enterprises are being supported by various development partners. The SOEs reform process will, therefore, ensure that parastatals and their restructuring are fully accountable, transparent, efficient, effective, and viable, complementing Government efforts in promoting economic growth and improved service delivery to the general public.”
The Finance minister said now that inflation is stable and rapidly declining, government will work gradually to adjust civil servant’s wages towards real wages, including non-monetary benefits which will increase their buying power.
Civil servants have become restive as a result of the decimation of their wages paid in local currency due to inflation, which stood at 761% for August. Health workers downed their tools recently in protest in a strike that lasted more than two months with teachers also going on strike this week.
Ncube revealed that the US$75 Covid-19 allowance Treasury is paying civil servants is derived from taxes it receives in forex.
“The country’s tax laws require tax payers to remit taxes on transactions in the currency of trade. Government therefore receives its foreign currency revenues from the taxes, duty, levies, royalties and part of these proceeds are being used to pay for civil servants’ Covid-19 allowances, which have been benchmarked in US dollars,” he said.
As government winds up the Transitional Stabilisation Programme (TSP), Ncube said the programme was conceived as the first step of a 12-year economic development plan which leads to the achievement of Vision 2030. The plan was broken into the TSP (two years 2018-2020), National Development Strategy 1 (NDS1) (five years, 2021-2025) and NDS2 (five years, 2026-2030).
“The TSP was launched against a background of rising inflation, unemployment, high fiscal and trade deficits, low foreign currency reserves etc and in this regard, there was need for a stabilisation plan. The major objectives of the TSP are to stabilise the macro-economic environment, inclusive of the financial sector by introducing necessary policy and institutional reforms for transformation towards a more private sector led economy, addressing utility and infrastructure shortfalls, and launching quick-win initiatives to stimulate growth,” he said.
“Reforms implemented under TSP included fiscal consolidation, restoration of monetary policy, liberalisation of the foreign exchange markets, the undertaking of governance reforms, entrenched re-engagement with the international community, facilitation of investment, and infrastructure development.”
Ncube added that: “Having now realised stability under the TSP, government now moves under the National Development Strategy (NDS1) to leverage on the successes registered to grow the economy and to reinstate the country on a sustainable growth trajectory.”