- The International Monetary Fund (IMF) has strongly warned the Reserve Bank of Zimbabwe to desist from messing in the operational economic activities of the country if the new reform strategies are to reach greater benefits.
“Accountability and transparency of the Reserve Bank of Zimbabwe (RBZ) should be strengthened. Moreover, the RBZ should refrain from quasi-fiscal operations and focus on core central bank activities," the IMF mission led by Vitaliy Karamenko which visited Zimbabwe during March 9-24, 2009 to conduct Article IV consultation discussions said in a statement.
At the end of the mission, Mr Karamenko, Mission Chief for Zimbabwe, said a steep decline in economic activity and public services contributed to a significant deterioration in the humanitarian situation in 2008, adding that economic disruptions caused by hyperinflation and a further significant deterioration in the business climate led to an estimated 14 percent fall in real GDP in 2008, on top of the 40 percent cumulative decline during 2000-07.
The mission also noted that poverty and unemployment have risen sharply, saying against the backdrop of the acute economic and humanitarian crisis, the recently formed government of national unity prepared a short-term emergency recovery programme, which focuses on macroeconomic policy and supply-side measures aimed at achieving low inflation, arresting economic decline, and improving social conditions.
“The mission welcomes the authorities’ commitment to eliminate quasi-fiscal activities and implement cash budgeting (i.e., matching monthly expenditure to monthly revenue) in 2009. To ensure an improvement in the delivery of public services, the government would need to mobilise significant donor financial support and contain the wage bill," the mission stressed.
The mission also noted that the credibility of the government’s commitment to fiscal discipline is reinforced by the adoption of the multiple currency system because under such a system it is not possible to monetise the budget deficit. The mission said to facilitate transactions and improve credit availability, there is an urgent need to attune the payments system and banking supervision to the needs of the multiple currency system.
“Regarding structural reforms, a number of positive steps that are in line with previous IMF recommendations have already been implemented, including price liberalisation, the removal of surrender requirements and most exchange restrictions on current account transactions, the imposition of hard budget constraints on parastatal enterprises, and the elimination of the Grain Marketing Board monopoly," said the IMF mission, further concluding that, "Going forward, strengthening the investment climate, ensuring protection of property rights, and maintaining wages at competitive levels will be essential for increasing domestic and foreign investment.”
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