THE International Monetary Fund (IMF) interest rate charged on Special Drawing Rights (SDRs) allocated to Zimbabwe last year rose by 2.43 percentage points this year as the country’s Treasury turned to the holdings for its capital projects and social spending following the outbreak of the Covid-19 pandemic, official figures have shown.
BERNARD MPOFU
Thse government, on 23 August 2021, received SDRs under the general allocation amounting to SDR677 436 012.00 (approximately US$958 million), from the International Monetary Fund (IMF). The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves.
On 2 August 2021, the board of governors of the IMF approved a general allocation of SDRs equivalent to US$650 billion (about SDR 456 billion) to boost global liquidity. This allocation addresses the long-term global need for reserves, helps build confidence, fosters the resilience and stability of the global economy, and supports liquidity-constrained countries in addressing the impact of the Covid-19 pandemic.
“The IMF charges interest on Zimbabwe’s net SDR holding at the IMF, using the flexible SDR interest rate. The rates have been increasing from the rate of 0.05% in August 2021, to 2.48% in October 2022, a new report on the allocation of the SDR’s has shown.
“The allocation provided a huge stimulus to the Zimbabwean economy, following the devastating impacts of the Covid-19 pandemic and has assisted Zimbabwe in its post Covid-19 recovery path.”
Despite getting SDRs, Zimbabwe missed out on a G7-backed multi-billion-dollar stimulus package designed to help countries of the global South weather economic shocks caused by Covid-19. The reason for the country’s exclusion is the failure to pay arrears to international financial institutions (IFIs), Finance minister Mthuli Ncube has said.
The Covid-19 pandemic has precipitated an unprecedented economic crisis worldwide, with disastrous social consequences. After 25 years of continuous growth, Africa was severely hit and suffered recession in 2020.
Despite receiving a quota-based allocation of nearly US$1 billion from the IMF last year, Harare was ineligible to receive more financial support after its debt stock ballooned over the years.
The country defaulted on arrears payments at the turn of the millennium, resulting in the failure to access long-term funding from multilateral lenders such as the World Bank, IMF and the African Development Bank.
As first reported by The NewsHawks last year, the world’s advanced economies parcelled out part of their IMF SDR to shore up developing countries currently reeling from the impact of Covid-19.
