News / National
IMF flies into Zimbabwe financial mess
06 Sep 2019 at 07:31hrs | Views
A TEAM of International Monetary Fund (IMF) officials will jet into the country next week for the first review of the Staff-Monitored Programme (SMP) at a time government finances are in a shambles with a number of set targets having being missed.
The SMP is an informal arrangement between the government and the IMF to monitor the implementation of key economic programmes in the country.
The SMP is designed to support the government's reform agenda. It will be monitored on a quarterly basis, and is intended to assist authorities in building a track record of implementation of a coherent set of economic and social policies that can facilitate a return to macroeconomic stability and help government's international re-engagement effort.
The team from the Washington DC-headquartered Bretton Woods institution, which will be in the country from September 14 to 18, will assess progress made on the SMP for the period between May and June 2019.
Economic policies under the SMP emphasise the restoration of macroeconomic and financial sector stability through: implementing a large fiscal adjustment, elimination of central bank financing of the fiscal deficit, and adoption of reforms to allow the effective functioning of market-based foreign exchange and debt markets.
Structural reforms include steps to reform and privatise state-owned enterprises, enhance governance, including in procurement and revenue administration, and improving the business environment. The SMP also includes important safeguards to protect the country's most vulnerable people.
However, the visit comes at a time government finances are in a chaotic state. Parliament has summoned Finance minister Mthuli Ncube — as a matter of urgency — to regularise a series of unauthorised expenditures which are contrary to the letter and spirit of the SMP.
For instance, MPs say government spent ZW$2,7 billion — which was then equivalent to US$2,7 billion in 2017; ZW$3,2 billion in 2018 and recently announced plans to spend ZW$10,85 billion — all without parliamentary authorisation — on top of the ZW$8 billion 2019 budget.
Parliament's demands and recommendations are contained in a report by the Parliamentary Portfolio Committee (Pac) on Public Accounts titled First Report of the Public Accounts Committee on Compliance Issues for the Ministry of Finance and Economic Development: First Session — Ninth Parliament.
The first review of the SMP also comes at a time the legislators have queried the exact quantum of Zimbabwe's total debt stock.
When Ncube presented his 2019 national budget in November last year, he said the country's domestic debt stood at US$9,6 billion, while the total debt was US$17,6 billion. This meant external debt was US$8 billion — which it remains as now.
The dramatic change, though, has been on the domestic debt. From US$9,6 billion, it is now a mere ZWL$8,8 billion (US$880 million) which is a staggering US$7 billion grand heist by government on domestic creditors.
The SMP will come at a time the National Assembly is demanding accountability on a series of violations of the constitution and the law — at least 17 breaches — on public spending, resulting in a substantial waste of public funds.
The report of the Pac committee — chaired by former Finance minister Tendai Biti — cites examples of 17 actions of non-compliance with the constitution and the law on public spending.
Among the 17 actions are non-compliance with provisions of Section 300(3) of the constitution in that Ncube failed to publish, in the Government Gazette, loans contracted and guarantees issued by government within 60 days of their conclusion.
The report also says Ncube did not comply with Section 300(4) of the constitution in that he failed to present to parliament a report on loans raised and guarantees issued by the state and a comprehensive report on public debt.
Ncube also failed to comply with Section 305(5) of the constitution in that he failed to present in the National Assembly additional or supplementary estimates of expenditure and additional or supplementary Bills.
Other acts of non-compliance noted by the report include non-compliance with provisions of Section 23(1) of the Public Finances Management Act (Chapter 22:19) in that since 2014, the Accountant-General has failed to issue warrants under his hand, authorising accounting officers to incur expenditure up to the limits and for the purposes and subjects to conditions contained therein.
The IMF's representative to Zimbabwe, Patrick Imam, told businessdigest last week that the team will revise downwards the projected annual gross domestic product growth rate as a result of a number of factors which include the drought and the prolonged power outages.
"The team will also update the economic forecasts. While I do not want to prejudge the findings of the mission, it is clear, compared to the projections of the original SMP, which did not foresee the severity of the drought and its secondary impact, nor the electricity shock, that growth is almost certainly going to be revised downwards and inflation upwards compared to the original SMP forecasts," Imam said.
"The original 2019 budget has already been superseded by the supplementary budget that was voted on a few weeks ago, so the review mission will have to recalibrate government spending forecast for year-end accordingly."
In his mid-term fiscal review last month, Ncube revealed that the country's GDP growth will be even less than the -2% projected under the SMP.
The SMP is an informal arrangement between the government and the IMF to monitor the implementation of key economic programmes in the country.
The SMP is designed to support the government's reform agenda. It will be monitored on a quarterly basis, and is intended to assist authorities in building a track record of implementation of a coherent set of economic and social policies that can facilitate a return to macroeconomic stability and help government's international re-engagement effort.
The team from the Washington DC-headquartered Bretton Woods institution, which will be in the country from September 14 to 18, will assess progress made on the SMP for the period between May and June 2019.
Economic policies under the SMP emphasise the restoration of macroeconomic and financial sector stability through: implementing a large fiscal adjustment, elimination of central bank financing of the fiscal deficit, and adoption of reforms to allow the effective functioning of market-based foreign exchange and debt markets.
Structural reforms include steps to reform and privatise state-owned enterprises, enhance governance, including in procurement and revenue administration, and improving the business environment. The SMP also includes important safeguards to protect the country's most vulnerable people.
However, the visit comes at a time government finances are in a chaotic state. Parliament has summoned Finance minister Mthuli Ncube — as a matter of urgency — to regularise a series of unauthorised expenditures which are contrary to the letter and spirit of the SMP.
For instance, MPs say government spent ZW$2,7 billion — which was then equivalent to US$2,7 billion in 2017; ZW$3,2 billion in 2018 and recently announced plans to spend ZW$10,85 billion — all without parliamentary authorisation — on top of the ZW$8 billion 2019 budget.
Parliament's demands and recommendations are contained in a report by the Parliamentary Portfolio Committee (Pac) on Public Accounts titled First Report of the Public Accounts Committee on Compliance Issues for the Ministry of Finance and Economic Development: First Session — Ninth Parliament.
The first review of the SMP also comes at a time the legislators have queried the exact quantum of Zimbabwe's total debt stock.
When Ncube presented his 2019 national budget in November last year, he said the country's domestic debt stood at US$9,6 billion, while the total debt was US$17,6 billion. This meant external debt was US$8 billion — which it remains as now.
The SMP will come at a time the National Assembly is demanding accountability on a series of violations of the constitution and the law — at least 17 breaches — on public spending, resulting in a substantial waste of public funds.
The report of the Pac committee — chaired by former Finance minister Tendai Biti — cites examples of 17 actions of non-compliance with the constitution and the law on public spending.
Among the 17 actions are non-compliance with provisions of Section 300(3) of the constitution in that Ncube failed to publish, in the Government Gazette, loans contracted and guarantees issued by government within 60 days of their conclusion.
The report also says Ncube did not comply with Section 300(4) of the constitution in that he failed to present to parliament a report on loans raised and guarantees issued by the state and a comprehensive report on public debt.
Ncube also failed to comply with Section 305(5) of the constitution in that he failed to present in the National Assembly additional or supplementary estimates of expenditure and additional or supplementary Bills.
Other acts of non-compliance noted by the report include non-compliance with provisions of Section 23(1) of the Public Finances Management Act (Chapter 22:19) in that since 2014, the Accountant-General has failed to issue warrants under his hand, authorising accounting officers to incur expenditure up to the limits and for the purposes and subjects to conditions contained therein.
The IMF's representative to Zimbabwe, Patrick Imam, told businessdigest last week that the team will revise downwards the projected annual gross domestic product growth rate as a result of a number of factors which include the drought and the prolonged power outages.
"The team will also update the economic forecasts. While I do not want to prejudge the findings of the mission, it is clear, compared to the projections of the original SMP, which did not foresee the severity of the drought and its secondary impact, nor the electricity shock, that growth is almost certainly going to be revised downwards and inflation upwards compared to the original SMP forecasts," Imam said.
"The original 2019 budget has already been superseded by the supplementary budget that was voted on a few weeks ago, so the review mission will have to recalibrate government spending forecast for year-end accordingly."
In his mid-term fiscal review last month, Ncube revealed that the country's GDP growth will be even less than the -2% projected under the SMP.
Source - Zim Ind
