eBusiness Weekly
Business Writer
The US$1 billion Special Drawing Right (SDRs) Zimbabwe received from the International Monetary Fund (IMF) yesterday will reinforce the country’s progressing economic reform agenda and boost its foreign currency reserves.
Finance and Economic Development Minister Mthuli Ncube and Reserve Bank of Zimbabwe Governor confirmed in a joint statement that Zimbabwe had received 677 million (US$961 million) under the IMF’s US$650 billion SDR allocation to cushion members from the negative impact of Covid-19.
The windfall comes as Zimbabwe’s reform agenda has gathered momentum with positive signs of a turnaround reflecting through declining inflation, exchange rate stability, budget surpluses, growth in exports and strong projected economic growth, among others.
Mthuli has forecast the domestic economy to grow by 7,8 percent, after two years of successive decline, driven by stellar agricultural season, massive construction projects and global mineral price boom.
The central bank has also not taken its eyes off the ball, introducing a foreign exchange auction last year that has been credited with ushering in macro-economic stability and inflation fall through stringent control of money supply growth.
“The funds were deposited in the Reserve Bank of Zimbabwe account with the IMF for value 23 August 2021. The immediate impact of this support from the IMF is to increase the foreign exchange reserves position of the country by US$961 million.
“This will go a long way in buttressing the stability of our domestic currency,” Mthuli and Dr Mangudya said.
The funds will be prudently deployed, with utmost accountability, to support social sectors namely health, education, and vulnerable groups, productive sectors that include industry, mining, tourism and infrastructure (roads, housing,).
Additionally, the fiscal and monetary authorities said the funds will shore up Zimbabwe’s foreign currency reserves, resourcing a contingency fund as well as reinforcing economic stability.
SDRs are the IMF’s account unit and as a currency, Dr Mangudya said, are easily convertible to the currency of choice. The central bank chief stressed that at any given time, there are investors looking to buy SDRs from any country selling them.
The RBZ Governor said in an interview yesterday the funds from IMF will significantly boost Zimbabwe’s foreign currency reserves, providing a buffer that enables the country to fund key economic and social programmes.
“Look at the IMF SDRs like any other currency, which if you want to use the money, for instance the British pound, you simply convert into the currency of choice at the ruling exchange rate,” Dr Mangudya said.
The central bank chief said availability of reserves would have a significant positive impact on confidence in the economy and a domestic currency, often buttered by the negative impact of shortages in the market.
However, the central bank chief also said while the IMF will boost national reserves, local banks were already sitting on about US$1,7 billion in foreign currency accounts, which authorities want to support key productive sectors.
“These IMF SDRs will not substitute our policies of managing the economy, but will complement rather than substitute our policies. We are going to continue with the ongoing,” Dr Mangudya said.
The total allocation —about US$650 billion—represents IMFs largest disbursement in history. IMF managing director Kristalina Georgieva, said the allocation was a significant shot in the arm for the world and, if used wisely, provided a unique opportunity to combat a potential Covid-19 related unprecedented crisis.
With sub-Saharan Africa experiencing its first recession in 25 years in 2020, the Bretton Woods’ economic tool could be used to help these seriously impaired economies.
