US$1bn SDRs to be used over three years

The US$958 million worth of Special Drawing Rights (SDRs) allocated to Zimbabwe by the International Monetary Fund (IMF) will be used over a three-year period, with US$311 million expected to be released this year, Finance and Economic Development Minister Professor Mthuli Ncube has said.

The SDR 677,4 million - or US$958 million - was allocated in August this year to help countries cope with the fallout from the coronavirus.

"In Zimbabwe's context, the funds will be used prudently, with accountability and transparency to support projects in the social sectors, namely health, education and the vulnerable groups, productive sector value chains; infrastructure investment and foreign currency reserves and contingency fund," Minister Ncube said on Thursday while presenting the 2022 National Budget in Parliament.

Some of the funds that will be released this year will be channelled towards developing the Harare-Beitbridge road, the Mbudzi Interchange and the Emergency Road Rehabilitation Programme, which have been allocated US$144 million.

Agricultural productive social protection schemes for rural and peri-urban households are set to get US$80 million, while procurement of Covid-19 vaccines would get US$71 million.

Procurement of Covid-19-related medical and testing equipment and vaccine roll-out programmes will get US$10 million and US$6 million respectively.

SDRs are not a currency, but an international reserve asset created by the IMF to supplement official reserves of member countries.

They can provide countries with liquidity.

With next year's economic growth forecast at 5,5 percent, the SDR allocation is expected to play a pivotal role.

According to Minister Ncube, the Government will release US$145 million towards sectors that are critical to economic development.

Investments in social sectors will get a disbursement of US$45 million, with US$35 million going towards the health sector while US$10 million will be reserved for education.

For the agriculture sector, US$30 will be channelled towards the Export Revolving Fund as a cash guarantee to banks, and US$20 million will be disbursed towards smallholder farmer irrigation schemes.

In terms of industry support, US$30 million is earmarked for retooling or a revolving fund for new equipment and replacement for the value chains.

This will be in the form of cash guarantee to banks.

The SDR allocations will be disbursed towards infrastructure development, with housing development getting US$10 million and gold centres US$10 million.

Treasury believes that development partners will continue to play a pivotal role in supporting the Government's efforts towards implementing development programmes and projects across priority sectors of the economy.

During January to September period, Zimbabwe received development assistance amounting to US$647,8 million, of which US$401,9 million was from bilateral partners and US$245,9 million from multilateral partners.

"A further US$202,4 million in development assistance is projected during the fourth quarter of 2021, giving cumulative receipts of US$850,2 million for the year," said Minister Ncube.

The Government maintains the economy will grow by 7,8 percent this year supported by a better 2020/2021 agricultural season, higher international commodity prices, stable macroeconomic environment and a well-managed Covid-19 pandemic.

Vision 30 is premised on transforming the country into an upper middle-income economy with a per capita gross national income (GNI) of over US$5 000 in real terms by 2030.

Current economic programmes are being guided by the five-year National Development Strategy 1 (NDS1), whose goal is to achieve accelerated inclusive, socio-economic growth through social transformation.

NDS1 involves graduating the economy from primary industry to one dominated by secondary and tertiary industry, in the process creating decent jobs and living wages.