Zimbabwe faces large financing gap in 2011 – IMF


The International Monetary Fund yesterday warned that Zimbabwe faced a significant budget financing gap this year amid a highly uncertain economic outlook, making clear it was not about to resume lending to the southern African country.

In a statement after talks with Zimbabwe’s authorities in the capital Harare, the IMF said the country’s budget was skewed by a massive public wage bill and not enough resources for social programs for the poor and important infrastructure spending.

It said the short-term growth potential, especially in mining, was strong amid higher global commodity prices.
“Despite historically high commodity prices … and impressive progress in revenue mobilization, a relatively sizable fiscal financing gap would emerge in 2011,” IMF mission chief to Zimbabwe Vitaliy Kramarenko said in a statement.
“The fiscal gap could be eliminated through the removal of ghost workers from the payroll, reinforced controls on employment levels, and a reduction in low-priority transfers to state-owned enterprises,” he added.

He said Zimbabwe’s policy to force foreign mining companies to transfer majority stakes to local black partners was among issues weighing on growth and efforts to reduce poverty.

Zimbabwe said last month it would give foreign mining firms six months to sell majority stakes to black investors as part of black empowerment efforts.

A unity government under President Robert Mugabe and rival Prime Minister Morgan Tsvangirai has stabilized Zimbabwe’s economy but has failed to attract much needed investment to rebuild the devastated economy.

The pair are divided on how to implement the empowerment law that would require foreign-owned companies, including banks and mines, to surrender 51 percent of their shares.

Kramarenko said Zimbabwe was a country in “debt distress,” and the situation was made worse by recent deals in which the government had borrowed money at very high rates.

It said strengthened policies and debt relief would be important for Zimbabwe to deal with its arrears.

The Fund said it would continue “close policy dialogue” with Zimbabwe, but made clear it would not lend to the country until the government had established a track record of policies, and had agreed to a comprehensive strategy for clearing its arrears to government creditors.