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IMF Team Due in Zimbabwe as Inflation Soars, Economy Collapses

A team from the International Monetary Fund is due in Harare next week for talks ahead of a key meeting in September at IMF headquarters that could result in the expulsion of Zimbabwe if it cannot pay down debt arrears of some $295 million.

Finance Minister Herbert Murerwa said the IMF team arriving Monday will be following up on a meeting with Zimbabwean officials held in June.

The IMF board is scheduled to discuss Zimbabwe’s future in the organization on Sept. 9. It has threatened to expel zimbabwe for its debt repayment arrears.

Harare has been in talks with South Africa about a loan of several hundred million dollars that would let it make at least a partial payment on those arrears.

But the loan discussions have become intertwined with talk of restarting a dialogue between Harare and the local opposition. President Robert Mugabe this week rebuffed efforts to arrange mediation of such talks, so the status of the Pretoria bailout deal is unclear.

The IMF team arrives as Zimbabwe’s economic problems continue to deepen. Inflation soared in July to an annual rate of 255% with consumer prices jumping 47% in a single month as critically short stocks of food and fuel pushed prices much higher.

The Zimbabwe dollar continues to depreciate, not only in the parallel market but also at official central bank auctions where the exchange rate for U.S. dollars topped 24,000.

The Harare Stock Exchange was also down sharply after Finance Minister Herbert Murerwa tabled a 10% withholding tax on financial transactions to help finance the massive state deficit of 5.7 trillion Zimbabwe dollars.

In addition, Mr. Murerwa announced a change in rules for minimum pension fund investments in state bonds that would oblige retirement fund managers to sell off stocks to bring bond holdings up to the minimum.

Exchange Chairman Emmanuel Munyukwi called the latest proposals “a disaster” for the market. The industrial index fell 6.5% in one day on the news.

Despite what seems to many observers to be an upward trend in inflation that is as steep as the downward spiral in national output, economic officials have expressed optimism that inflation will start to decline in the next month or so.

Economist Eric Bloch of Bulawayo, a member of the Central Bank’s board of advisors and a newspaper columnist, expressed some degree of skepticism on this point in an interview with reporter Chris Gande of VOA’s Studio 7 for Zimbabwe.

More reports from VOA's Studio 7 for Zimbabwe...