The Sunday Mail
IMF representative to Zimbabwe Patrick Imam has said the main objective of the Staff Monitored Programme that the multilateral institution agreed upon with the Zimbabwean Government is to reduce the fiscal deficit and restore macroeconomic stability.
Last week, IMF managing director Christine Lagarde announced that the global lender had approved a Staff Monitored Programme to support Zimbabwe’s economic reform efforts.
The Staff Monitored Programme (SMP) runs from May 15, 2019 to March 15, 2020.
In an SMP presentation at Sapes Trust last week, Mr Imam said the SMP’s main objective is to reduce the fiscal deficit to restore macroeconomic stability, “while maintaining investment in infrastructure and priority social spending”.
This is in line with what Finance and Economic Development Minister Mthuli Ncube has been implementing, with treasury having achieved a budget surplus of $443 million in the first quarter of 2019.
At the same time, Minister Ncube has been using the surplus to fund social programmes such as Basic Education Assistance Module (BEAM), health support, teaching and learning materials, student stipend support, school feeding, special needs education, among many other expenditures that could have remained uncatered for, had revenues not outperformed targets.
Mr Imam said the SMP was also aimed at stopping monetary accommodation of the fiscal deficit to stabilise inflation and the exchange rate.
In the last few years, Government has been turning to the issuance of treasury bills and borrowing from the central bank to accommodate unbudgeted for spending. But Minister Ncube has since frowned upon this practise saying the use of treasury bills will be very minimal going forward.
This, coupled with implementation of financial sector reforms and tightening the regulatory framework, is expected to increase financial sector stability.
Mr Imam also said there is need for Government to address governance and corruption vulnerabilities.
Latest appointments made by President Mnangagwa must be seen as a step in the right direction.
The President has sought to strengthen public institutions through new appointments at institutions such as Procurement Regulatory Authority of Zimbabwe, which was launched last week; Zimra, where there is a new board, and at ZACC where Justice Loice Matanda-Moyo is the new sheriff in town.
Other areas that the SMP will focus on include advancing the structural reform agenda, including in Public Financial Management (PFM) and revenue administration, as well as State-Owned Enterprise Reform, said Mr Imam.
Government intends to wean and sale off several SOEs while some such as GMB and ZESA among others are set to be restructured.
Mr Imam said the base line for fiscal adjustment is built on a revised 2019 Budget approved by Cabinet on April 23.
He said significant fiscal adjustment is needed to stabilise the economy and restore confidence.
This will entail the reduction of the wage bill by 2,5 percent of GDP and also reducing grain subsidies by 2,3 percent of GDP in 2019.
Mr Imam added that the envisaged “deep fiscal adjustment needs to be carefully implemented to avoid a too a heavy toll on vulnerable portions of the population.”
Government will also have to contend with “a slow recovery in confidence that delays a resumption of economic activity, particularly in export industries like mining.”