New twist to IMF funds saga
THE Reserve Bank is empowered by law to manage and disburse the US$510 million extended to Zimbabwe by the International Monetary Fund, it has emerged.
In the two months since the money was released to Zimbabwe, controversy has raged over who should manage the funds between the RBZ and the Finance Ministry.
It has also been established that the funds, the bulk of which were released in August under the IMF Special Drawing Rights support to members, were not a loan and Zimbabwe will only have to pay an annual fee of 0,26 percent of the principal amount (about US$1 million). This was contrary to claims that accepting the money would worsen Zimbabwe’s debt position.
US$400 million has been deposited into the central bank’s account and the other US$110 million is being held in an IMF suspense account. Investigations by The Herald into the ongoing wrangle have revealed that Section 49 of the Reserve Bank of Zimbabwe Act gives the central bank powers to manage and allocate such funds.
"The bank shall establish and maintain an international reserve which shall consist of all or any of the following assets (i) the entitlement to make reserve tranche purchases from the International Monetary Fund and (ii) the holdings of Zimbabwe of Special Drawing Rights of the International Monetary Fund.
"The bank shall, to the best of its ability, maintain the international reserve at a level which, in the bank’s opinion, will be adequate for the execution of the monetary exchange rate policies of Zimbabwe and for the prompt settlement of the country’s international obligations."
There has been a tug-of-war between the central bank and the Ministry of Finance over who should allocate funds, with the latter choosing to go through the budget process while the former has been inclined towards immediate disbursement to induce liquidity in the market. The central bank proposed the funds be allocated to the mining, manufacturing and tourism sectors.
RBZ also said the money be used to capacitate public utilities, make loan repayments and to recapitalise the central bank, among other priorities. Finance Minister Tendai Biti said he would only allocate the funds through the 2010 National Budget due for presentation next month. IMF deposited US$408 million on August 28 as part of a US$250 billion disbursed to member countries to fend off the effects of the global economic recession.
Efforts last night to get a comment from the IMF team presently in the country were fruitless as they were said to be in meetings. It is understood that they held meetings with Finance Ministry officials and those from Economic Planning and Investment Promotion. Sources close to the discussions said the IMF mission had earlier advised the Ministry of Finance not to draw on the funds because of Zimbabwe’s debt position. However, it has now been revealed that the funds will not add to the debt as they are effectively free handouts to members.
The team was also caught unawares by revelations that the central bank had the powers to receive and allocate the resources. Efforts to get a comment from RBZ Governor Dr Gideon Gono and Minister Biti were fruitless. A source close to the deliberations confirmed the developments.
"The law clearly articulates that the Reserve Bank of Zimbabwe has to exercise its professional abilities to ensure that such resources are promptly discharged for the benefit of the economy," said the source.
The sources added that statements by the IMF mission and other stakeholders discouraging Zimbabwe from using funds already deposited into the RBZ account were baseless.
"These are mere extensions of the sanctions issue. How can they say Zimbabwe cannot use the money because of its debt situation yet these funds are not loans?
"In fact, the IMF has violated Zimbabwe’s laws by recommending and explicitly saying the RBZ has no scope to deal with the SDRs. The fiscal authorities would play an oversight role.
"The Minister of Home Affairs has no power to arrest because this jurisdiction rests with the police; the same with the Minister of Finance who plays an oversight role.
"The mandate to manage the money is at the discretion of the central bank. Earlier references in some quarters to the effect that attempts by the RBZ to utilise the funds were illegal are baseless as it turns out that doing so is lawful," the source said.
As of last night, it was not immediately clear what processes or channels the funds at the centre of the controversy would now assume following the latest revelations.
However, on Wednesday the Minister of Industry and Commerce Welshman Ncube told a Confederation of Zimbabwe Industries meeting in Harare that Government had decided on allocations of the US$400 million IMF funds, with at least US$150 million earmarked for the productive sector.
The balance would be allocated to repayment of the IMF debt, which currently stands at US$140 million, capacitating hospitals and other public works programmes.