The Sunday Mail
Leroy Dzenga and Tanyaradzwa Rusike
August 23 was a particularly long day for Finance and Economic Development Minister Professor Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya.
The two men spent the better part of the day anxiously glued to their screens.
At around 9pm, their minds were put at ease, as notification that Zimbabwe had duly received its share of the Special Drawing Rights (SDRs) from the International Monetary Fund (IMF) came through.
“I had to stay awake to make sure that I know that it has hit the account. So, me and Governor Mangundya, we were staying awake to see the time the SDR would hit the account,” said Minister Mthuli Ncube during an interview with the Zimpapers Television Network (ZTN) on Thursday.
The Treasury chief knew what this allocation means for the economy – a stronger chance for redemption.
SDRs are an international reserve currency run by the IMF and are usually deployed in instances where there are shocks to the global economy.
In 2009, more than US$283 billion worth of SDRs were released to counteract the impact of the global financial crisis, with Zimbabwe getting US$400 million.
This time, the IMF has released US$650 billion — the biggest allocation in its history — to help countries recover from Covid-19-induced shocks.
And Zimbabwe has since received its US$961 million share.
“The SDRs will be managed transparently, prudently and they will be deployed carefully,” Professor Ncube said.
Spending will be captured in the 100-day cycle reports that are released by Government quarterly.
“We have a history of prudent management as the Second Republic. I have a history of prudent management of public finances as Minister of Finance and Economic Development. I have run a balanced budget; the record speaks for itself.
“There are four areas where these funds will be allocated — social sector, productive sector, infrastructure, and support for reserve and continuous funding.”
The funds will not be used to pay salaries, but for key interventions such as acquiring more vaccines to give added impetus to the vaccine rollout.
Health institutions will also be given priority through upgrades and new equipment, while the education sector would be revamped.
Boarding schools are being mulled for the country’s eight rural provinces.
Agriculture will also benefit, including sub-sectors such as horticulture.
Further, Government is considering revolving funds that will be administered through banks.
Prof Ncube added: “In education, we want to do something that is very important. One idea we have is, let us build one boarding high school and per province. So we want to build eight boarding schools. Provinces such as Matabeleland South and Mashonaland Central do not have enough boarding schools.”
There is room to fine-tune the plans, he said, based on input from stakeholders.
Overall, the programmes are meant to create a prosperous society in line with Vision 2030.
Investment in infrastructure is considered critical in achieving this vision.
“When I was still in academia, I did a research which said investing in infrastructure reduces poverty. We are going to focus on roads and housing. A tarred road, for instance, changes a lot of things. Once the road network is good, commerce follows,” said Minister Ncube.
The Treasury chief said there were sufficient safeguards, including from the IMF, to prevent abuse of the funds.
In its recently published guidelines, the Washington-based international financier said it will be monitoring the rate at which the fund is used.
How the money is spent, however, is to Government’s discretion.
Stability
Economist and RBZ Monetary Policy Committee member Mr Persistence Gwanyanya said the IMF funds were likely to stabilise the local currency.
“The allocation means our reserves have gone up by US$961 million. Such reserves are important in that they stabilise the local currency,” said Mr Gwanyanya.
“We have US$1,6 billion sitting in nostro accounts. We have a significant amount of capital which remains withheld because the balance sheet of the economy is not very strong.”
He said the money will not be used to clear the US$200 million backlog on the foreign currency auction.
“The clearing of the forex backlog will happen incidentally. The moment Government wants to use some of the SDR for some social programme which will need local currency, the money will find its way to the RBZ. There will not be a deliberate plan to do that, but, incidentally, the auction will benefit.”
Zimbabweans would feel the impact of the financial boost, he added, once targeted investments take root.
The same optimism is shared by economist Mr Eddie Cross, who believes the funds signal a positive turn in the local economy.
“We have not had anything like this in many years. This is the first time we have received an amount this significant since 2008,” Mr Cross said.
“Last year, there was a similar distribution of funds, but Zimbabwe was excluded at the instance of the United States, which used its veto power on the IMF board to block the funding. The money was not as significant as this present SDR allocation, but it would have helped in the Covid-19 financing.”
He said the allocation is a positive signal that not only shows that “we have made progress on meeting our obligations” but also “a recognition that we are on the road to recovery”.
“I am convinced that the Finance and Economic Development Minister will not use the money to buy trinkets and luxury cars. He has said, and I agree, that the money should be used to boost our productive capacity.”
Trade economist Professor Gift Mugano said the funds that were received from the IMF in 2009 did not impact on the general populace because part of it was used to clear the debt owed to the international financier.
He, however, advised Professor Ncube to rethink his stance on building boarding schools.
“Minister Ncube said part of the money will be directed to building boarding schools, which I don’t subscribe to. I would advise him not to build boarding schools because it will only benefit the minority who can afford to take their children to boarding schools.
“What about those in the rural areas? They should be investing in ICT so that children in rural areas have access to education.”
