Reserve Bank of Zimbabwe Governor Gideo Gono convinced the International Monetary Fund Executive Board late last week not to vote to force the country to withdraw from the global financial institution. But he now faces a greater challenge: pulling Zimbabwe’s economy back from the brink of total collapse.
The country’s economy has contracted by an estimated 40 percent in the past five years, inflation is running over 250 percent a year, 70 percent of the population is unemployed, food supplies are down to three weeks, fuel is in critically short supply, and even the central bank is now scraping bottom to muster up foreign exchange.
The IMF board on Friday deferred judgment on Zimbabwe for another six months, during which period the country has been urged to pay debt service arrears standing at $174 million following the recent payment of $120 million which the central bank is believed to have drawn from the hard currency accounts of Zimbawean exporting companies and other holders of available foreign exchange.
The IMF also wants to see meaningful economic reform, especially a reduction in Harare’s massive public deficits and liberalization of export and other markets
According to a statement released by the IMF, the board noted that Harare has taken some steps on exchange rates and monetary policy, but these “fell well short of what is needed” to overcome the country’s economic difficulties.
It cited the “significant risk that unless strong macroeconomic policies are undertaken without delay, economic and social conditions could deteriorate further.”
The IMF board “urged Zimbabwe to adopt and implement a comprehensive and coherent adjustment program as a matter of urgency, in the areas of fiscal, monetary, and exchange rate policies and structural reforms,” and “stressed that providing adequate social safety nets and food security for vulnerable groups, including those affected by "Operation Restore Order" and HIV/AIDS, are also critical priorities.”
Following the decision, senior editor Ray Choto of VOA’s Studio 7 for Zimbabwe spoke with Reserve Bank Governor Gono about the country’s close call at the IMF and asked him how he plans to stem the decline and reactivate productivity.