The International Monetary Fund on Monday urged Zimbabwean President Robert Mugabe’s authoritarian government to change policy tack and come in from the international cold to avert economic disaster.
The IMF, which has warned Zimbabwe it faces expulsion from the lender, highlighted a five-week government campaign to demolish shantytowns as exacerbating the country’s profound troubles.
It said an IMF team, during a June 13-25 visit to the country, had found much of concern despite ”cordial meetings” with Finance Minister Herbert Murerwa and the Reserve Bank of Zimbabwe (RBZ) leadership.
The IMF stressed that given the scale of problems facing Mugabe’s isolated regime, Zimbabwe needs ”decisive action” to lower its fiscal deficit, tighten monetary policy and set up a market-based currency system.
”A rebuilding of relations with the international community is a critical part of the effort to reverse the economic decline,” the mission said in a statement on its return from Harare.
It added: ”We hope the authorities will work more closely with us to formulate and implement such a policy package, which would help stabilise the economy and improve the welfare of the Zimbabwean people.”
Mugabe’s government has earned pariah status in the West, accused of rigging elections and of plunging parts of its population into starvation by confiscating productive land from white farmers.
The IMF closed its offices in Zimbabwe late last year as relations worsened with the Mugabe government, which blames US, British and European Union sanctions for its economic plight.
Zimbabwe has fallen behind in IMF repayments on more than US$300-million in debt since 2001. The IMF in February gave the government six months to meet its obligations or face expulsion.
The government is now being investigated by a United Nations envoy after demolishing homes and razing market stalls in what it calls a bid to rid the country of squalor and crime.
The UN says at least 200 000 people have lost their homes in the campaign but the Zimbabwe opposition maintains that 1,5-million people have been affected.
Critics say the aim of the campaign is to punish urban voters who supported the opposition in March elections won by Mugabe’s ruling Zanu-PF party and to drive Zimbabweans back to the countryside.
Mugabe has defended the operation and won apparent support from the 53-nation African Union which has refrained from criticising the campaign, describing it as an internal matter.
But the IMF was in no doubt that the operation, dubbed in part ”Restore Order”, was worsening Zimbabwe’s dire economic situation.
Economic output is expected to decline ”sharply” this year, the IMF team said, warning of intensifying difficulties in agriculture caused by drought and foreign exchange shortages.
It said that on present policies, Zimbabwe’s budget deficit will jump this year, ”partly due to the cost of higher food imports, interest payments and higher pension costs”.
”Together with the RBZ’s substantial producer and credit subsidies, these deficits would fuel a sharp increase in money supply, and hence inflation, by end-2005.”
The IMF mission said it had been assured by Murerwa and RBZ governor Gideon Gono that they want to contain the budget deficit.
But it warned: ”The macroeconomic outlook is further clouded by the gravity of the food security situation and implementation of ‘Operation Restore Order’, which threatens to worsen shortages, contribute to lower growth, and aggravate inflation pressures.” – Sapa-AFP