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Zimbabwe: Government makes surprise payment to IMF

Business Day (South Africa), by Karima Brown, Jonathan Katzenellenbogen, Vukani Mde and Dumisani Muleya
September 1, 2005

Zimbabwe has made a surprise $120m payment to the International Monetary Fund (IMF) in a bid to stave off expulsion from the international lending institution. “Zimbabwe has managed to pay $120m to the IMF out of its own resources as part of efforts aimed at servicing its international debt,” Zimbabwean state television said last night.
It said the payment was “a source of immense national pride as it demonstrates the country’s unwavering commitment to turn around its economic fortunes”.
Finance Minister Herbert Murerwa said the payment proved “that no one can write off Zimbabwe as yet”, and that we “can still do things on our own”. An IMF team is in Zimbabwe for key talks which were extended by two days and ended yesterday.

The news bulletin, however, quoted the Reserve Bank of Zimbabwe as saying that the amount paid back “does not nullify or close present negotiations with SA” on a rescue package that has been the subject of intense negotiations between the two countries’ governments.
It was unclear yesterday whether the payment would prevent Zimbabwe’s expulsion from the fund when the country’s September 9 deadline runs out next Friday.

Sources in Harare and Pretoria said the money was not enough to wipe out Zimbabwe’s IMF debt, but would prevent expulsion. However, a private banker, speaking on condition of anony- mity, said that Zimbabwe must make an additional $50m payment to escape expulsion.
South African government spokesman Joel Netshitenzhe welcomed the payment.
“If it is true, it’s something that the government would welcome, since it would mean that Zimbabwe has found a solution to the immediate pressure (possible expulsion),” he said.
Sources said Zimbabwe had scrounged in its local market and mopped up corporate foreign currency accounts.
While Zimbabwe had a weekly foreign exchange auction, private businessmen in the country charged that the country’s central bank had been keeping the market short of foreign currency in recent months. They said there was evidence the central bank had not allocated the full amount of foreign exchange that should have been up for auction.

Sources said government raided corporate foreign currency accounts and used a $59m handout it got recently from China to beef up its reserves. Over the past 18 months Zimbabwe escalated its repayments from $1,5m to $9m a quarter, but this was inadequate to stabilise the arrears.

By July Harare had managed to repay only $36,6m. Recent efforts by Zimbabwe to get $67m from Iran had hit a snag over guarantees and security. This was one of many failed attempts by the government of President Robert Mugabe to secure a bale-out from foreign sources, including Uruguay and Libya.
There was speculation among observers that Mugabe may have turned to his allies in the Southern African Development Community (SADC) to secure the money.
One researcher, who spoke on condition of anonymity, said Mugabe could have got the money from Angolan president Jose Eduardo dos Santos, whose personal wealth is estimated at $6bn.
“Angola and Zimbabwe share a common animosity to South African efforts at democratisation in the region,” the researcher said.

He said it was also possible for Zimbabwe to source funds from their lucrative involvement in the mineral-rich Democratic Republic of Congo, where Zimbabwe’s army provided personal security to President Joseph Kabila.

What is clear is that the Zimbabwean government was determined to come up with the cash without having to rely on SA’s proposed $470m baleout, which had stringent economic and political conditions attached to it.
But the fact that Zimbabwean officials kept SA in the dark about their ability to source funds appeared to cast a dark cloud over ongoing talks about the bale-out.
A senior South African government source close to the negotiations said: “The fact that they did not say they could raise the money locally raises questions about whether we can believe what they say about the state of the Zimbabwean economy.”

Zimbabwe’s surprise payment could also sour relations with the IMF, which has a senior delegation on a fact-finding mission in Harare ahead of its executive board meeting next week.
If Zimbabwe had undeclared foreign exchange reserves, this could be seen by the fund as a serious violation of its rules on transparent presentation of key data.
Meanwhile, sources in Harare last night said Zimbabwe’s central bank governor Gideon Gono was in SA for talks with his South African counterpart, Tito Mboweni. They said Gono would try to get the South Africans to put up the shortfall. However, South African government officials denied this yesterday.
National treasury spokesman Logan Wort said: “There is no meeting scheduled with Zimbabwe. In any event the finance minister will be out of the country for the rest of the week.” Netshitenzhe also said there was no government meeting scheduled with Zimbabwean officials.

But officials said talks between the two countries over the $470m bale-out would continue. The economic and political conditions that SA had attached to the lifeline would remain, they said. There were, however, conflicting signals about Zimbabwe’s willingness to accept the conditions, given this week’s passage of draconian laws, despite what South African officials said were “encouraging signs” on the economic reform front.

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