No resumption of lending, says IMF

gap which effectively removes any chances of resumption of lending by the multilateral institution.
The statement follows a two-week visit to the country by an IMF delegation which met financial authorities in Harare.
The IMF said a huge public wage bill, acting as a constraint to social and economic development programmes, was weighing down the country’s financial plan for this year.
“Despite historically high commodity prices . . . and impressive progress in revenue mobilisation, a relatively sizeable fiscal financing gap would emerge in 2011. The fiscal gap could be eliminated through the removal of ghost workers from the payroll, reinforced controls on employment levels, and a reduction in low-priority transfers to State-owned enterprises,” said IMF mission chief to Zimbabwe Mr Vitaliy Kramarenko in a statement.
But local economists have lamented the limited role the IMF has been playing in the country’s economy.
Mr Witness Chinyama, for instance, said the IMF’s role was inherently constrained by the illegal sanctions imposed upon the country.
“The IMF has been holding a number of these Article IV consultations with Zimbabwean authorities and has more than once hailed the country’s economic progress,” he said. “Yet there has been no indication that it may consider re-opening lines of credit to Zimbabwe.
“What we need to appreciate is that the IMF operates in the framework of Zidera, which prevents it from extending funds to Zimbabwe, even if it wanted to, hence the limited role it has been playing.”
Another economic analyst, Mr Brains Muchemwa, said the IMF’s stance on Zimbabwe was reproachable in the context of its approach to other countries, and would have long-term repercussions on the economy. “Considering how the IMF has behaved with the European countries, such as Greece, that are in more dire debt stress than Zimbabwe, the reluctance to resume lending to Zimbabwe is unfortunate.
“The current liquidity crunch will remain pronounced and considering that the IMF’s opinion is highly considered by international investors, Zimbabwe will most likely remain outside the crucial consideration of significant FDI (foreign direct investment).”
Finance Minister Tendai Biti earlier hinted at the anticipated fiscal financing gap in February this year. He said the economy had underperformed in the first six weeks of this year, as the Zimbabwe Revenue Authority had collected only US$156 million against a set target of US$252 million for that period.
This has raised concerns that if the trend continues the Government could miss the annual target of US$2,7 billion.
Employment costs have continued to stake the large portion of the national financial plan, even as there has been a marginal decline in the 2011 National Budget compared with the year before.
An economic breakdown of the 2011 Budget reveals that employment costs are set to account for 52 percent of the total allocation, with operations coming in at 26 percent and capital expenditure at 20 percent.
This means that recurrent expenditure will continue to dominate the country’s financial plan next year, at 78 percent, in comparison with capital expenditure at 20 percent of the finances. This is despite the huge funding requirements for infrastructure projects as indicated in the African Development’s “Infrastructure and Growth in Zimbabwe” report.
The AfDB has said Zimbabwe requires US$14,2 billion over the next 10 years to boost infrastructure and hence capacity for economic growth.
Notwithstanding the concerns, Mr Kramarenko still noted the high short-term growth potential with regard to the mining sector, largely buoyed by strong international commodity prices.
The IMF maintained that it would not extend any loans to Zimbabwe although close working ties would continue.