A senior International Monetary Fund spokesman criticized Zimbabwe’s economic and monetary management on Thursday, in particular the “quasi-fiscal operations” of the Reserve Bank of Zimbabwe which have contributed to a consolidated public deficit including the government and central bank equal to 60% of national output.
IMF Director of External Relations Thomas Dawson took issue with contention by the governor of the central bank, Gideon Gono, that Zimbabwe’s roaring inflation is due to the country’s effort since late last year to pay down its debt arrears to the Fund.
“We do not believe that is in fact the case at all,” Dawson told an IMF press briefing that was carried over the Internet as well. “The reality is that inflation in Zimbabwe has been driven mainly by quasi-fiscal activities of the Reserve Bank of Zimbabwe."
“The government deficit that is reported at 3% of (gross domestic product) in 2005 is only a small part of the picture,” Dawson continued. “A truer picture of the public deficit is provided by the consolidated deficit of the Reserve Bank of Zimbabwe and central government,” which he said approached 60% of GDP in 2005, vs. 27% in 2004.
Dawson’s response was sparked by a press query as to the IMF’s view on the central bank’s reported printing of Z$21 trillion in new currency to purchase foreign currencies needed to pay down IMF arrears in recent months. Gono has been quoted as saying that such money creation has been a prime factor in driving inflation over 600%.
The IMF spokesman questioned the link between debt payments and inflation, saying government fiscal policy and quasi-fiscal activities by the central bank were to blame. The central bank in recent years, and in accelerating fashion, has made large sums available to agriculture and industry in an effort to stave off economic collapse.
Dawson also expressed perplexity on the part of the IMF as to the exact source of funds Zimbabwe used to pay down its debt arrears.
Explanations by Zimbabwean authorities “are not inconsistent with the revised reserves and balance of payments data reported” to the Fund, he said, “but we are unable to independently verify the data and explanations provided.”
He urged better reporting and greater transparency of financial accounts.
Above all, Dawson called for implementation of “a comprehensive policy package so that Zimbabweans can benefit from a sustained non-inflationary growth and a strengthening external position” which would allow it to meet obligations.
He rejected charges that shortages of food, fuel and medicine are due to heavy IMF debt payments. “If in fact there have been shortages in that regard, it has been entirely because the authorities have chosen the course of action in not implementing (a) comprehensive package of macroeconomic and structural reforms," he said.