The International Monetary Fund (IMF) said on Wednesday it will only provide aid to Zimbabwe once the unity government meets key conditions, dealing a blow to efforts to secure billions of dollars in aid to revive the economy.
Prime Minister Morgan Tsvangirai, who took office last month in a unity government with long-time President Robert Mugabe, has made a priority of trying to restore ties with international lenders.
The IMF sent a mission to Zimbabwe just one month after Tsvangirai took office, and members of his party had hoped that a new economic revival plan would convince the IMF to resume its lending.
But after its two-week mission, the IMF laid out a series of conditions for Zimbabwe to again receive financial and technical assistance, saying Harare must establish a track record of solid policies, win donor support and a resolve outstanding debts, including its arrears to the Fund.
”IMF staff stand ready to continue to assist the authorities through policy advice,” it said in a statement.
Neighbouring countries have also called on the IMF to restore Zimbabwe to its good books, as Southern African leaders prepare to meet on Monday to discuss how to deliver economic aid to the country.
The IMF mission was the first to Zimbabwe since 2006, when Mugabe’s government narrowly averted expulsion from the body over some 125 million dollars in arrears.
The IMF has long criticised Mugabe’s economic policies but had praise for the efforts of the new unity government.
The decision to allow Zimbabweans to conduct their daily business in foreign currency had already helped stop hyperinflation and strengthened the credibility of the government’s reform programme, it said.
The national statistics office said on Tuesday that United States dollar prices for local goods has fallen slightly since January. The now-worthless local currency has disappeared from the streets.
The IMF statement noted the dramatic worsening of Zimbabwe’s humanitarian crisis last year, when a cholera epidemic erupted killing more than 4 000 people and chronic food shortages deepened, leaving seven million people in need of aid — from a population estimated as low as nine million.
”A steep decline in economic activity and public services contributed to a significant deterioration in the humantarian situation in 2008,” it said.
Last year, Zimbabwe’s economy contracted 14%, it added, after shrinking by 40% from 2000 to 2007.
”To ensure an improvement in the delivery of the public services and the humanitarian situation, the government would need to mobilise significant donor financial support and contain the wage bill,” it said.
It also praised moves to abolish price controls and lift restrictions on current account transactions.
”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,” it added.
Finance Minister Tendai Biti, Tsvangirai’s top aide, told reporters that Zimbabwe needs eight billion dollars to rebuild shattered infrastructure — including the collapsing sanitation system, which allows cholera to thrive.
The government needs an additional $100-million a month just to keep running, but is collecting only $20-million a month in revenue, he said.
Biti acknowledged international criticism of the new government, but insisted that the power-sharing regime needed to succeed.
”We also know this government has its own problems. This experiment has to work because the consequence will be drastic,” he said.
”This government is in its formative stage. We need help,” Biti added. — Sapa-AFP