Looting concerns abound over US$1bn IMF windfall

Zimbabwe on Monday received a whopping US$961 million, its allocation under the International Monetary Fund (IMF)'s US$650 billion Special Drawing Rights (SDR) amid fears of abuse largely due to the country's history of lack of transparency and accountability.

The SDR is largely seen as a game-changer with economic experts expecting it to drive growth and provide the much-needed capital to support the local economy which has suffered from a weakening local currency and low aggregate demand.

Zimbabwe has struggled for two decades to attract fresh funding from international financial institutions (IFIs) due to its ballooning debt and arrears of well over US$11 billion which is almost three times the national budget.

IMF has also cited Zimbabwe's generally self-destructive foreign policy, gross human rights violations, and a history of disputed elections and lack of respect for property rights as its reasons to deny Zimbabwe funding.

Research firm Morgan & Co recently said inflationary pressures would be limited in 2021, bearing in mind a strong current account balance position, now at over US$1,8 billion, and the impact of the US$1 billion SDR allocation from IMF.

However, transparency and accountability is critical to the delivery of the SDR in Zimbabwe with experts from the Zimbabwe Council of Churches insisting that Treasury and the central bank should stick to IMF guidelines in respect of allocations and prioritise the productive sector and monitor the process to avoid abuse.

In a joint statement, the Finance ministry and the Reserve bank of Zimbabwe (RbZ) confirmed that the country had received US$961 million from the IMF under its US$650 billion SDR allocation earmarked to provide liquidity to the global financial system.

"The funds were deposited in the RBZ account with the IMF for value 23 august 2021," read the statement signed by RBZ governor John Mangudya and Finance minister Mthuli Ncube.

The immediate impact of this support from the IMF, according to the statement, is to increase the foreign exchange reserves position of the country by US$961 million. This is expected to 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," read part of the statement.

"We would like to express our great appreciation to the IMF for this disbursement which shall be used transparently in line with the IMF guidance note," the Treasury chiefs said.