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Finance minister Mthuli Ncube

Economy

Zim to miss out on G20’s US$650bn IMF outlay

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ZIMBABWE may miss out on a French-backed US$650 billion economic support programme under which the world’s advanced economies are expected to parcel out part of their Special Drawing Rights (SDR) to shore up developing countries currently reeling from the impact of Covid-19, The NewsHawks has established.

BERNARD MPOFU
Analysts say the Covid-19 pandemic has led to an unprecedented economic crisis worldwide, with disastrous social consequences. After 25 years of continuous growth, Africa is severely hit and suffered a recession in 2020.

The International Monetary Fund (IMF) estimates that additional financing of up to US$285 billion would be needed between 2021 and 2025 for African countries to step up the spending response to the pandemic, with about half of it for African low-income countries. 

The middle-income countries also require special attention. The multilateral lender also warned that in the absence of collective action, the financing and objectives of the 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063 will be compromised.

France this week hosted the Paris Summit on supporting African economies after the Covid-19 pandemic caused economic shocks on the continent. Paris took the lead and made a firm commitment to lobby advanced economies to parcel out part of their International Monetary Fund (IMF) SDR to weaker economies.

A declaration of the document which was seen by The NewsHawks shows that Zimbabwe, which badly needs financing to stabilise its economy, was conspicuous by its absence at the Paris Summit which was attended by Francophone, Saxophone and Lusophone countries this week.

Zimbabwe, currently reeling under a protracted liquidity crunch and in dire straits, may however get 800 million SDR – about US$1.1 billion – from the IMF’s new economic rescue package for the global economy ravaged by the Covid-19 pandemic under strict conditions.

SDR refers to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries.

Here is the list of participants which adopted the declaration:
Algeria, Angola, Belgium, Benin, Burkina Faso, Cameroon, Canada, China, Comoros (a Chinese ally which counterbalanced Russian and Indian influence in the Indian Ocean), Congo, Democratic Republic of Congo, Ivory Coast, Egypt, Ethiopia, France, Germany, Ghana, Italy, Japan, Kenya, Mali, Mauritius, Mauritania, Morocco, Mozambique, Netherlands, Niger, Nigeria, Portugal, Rwanda, Saudi Arabia, Senegal, Spain, South Africa, Sudan, Tanzania, Chad, Togo, Tunisia, United Arab Emirates, United Kingdom, United States of America, Zambia.

The summit was also attended by the chairperson of the African Union, the chairperson of the African Union Commission, the president of the European Council and the president of the European Commission.

“We will leverage on the international financial system to create the much-needed fiscal space for African economies. We call for the swift decision on and implementation of an unprecedented general allocation of IMF’s Special Drawing Rights (SDRs) that is expected to amount to US$650 billion, of which about US$33 billion to increase reserve assets of African countries, and urge countries to utilise these new resources transparently and effectively, reads the declaration in part. 

“We are determined to significantly magnify its impact for Africa, by exploring on-lending SDRs on a voluntary basis through the IMF’s Poverty Reduction and Growth Trust (PRGT), and by exploring a range of additional options with the IMF, World Bank and other MDBs to enable possible on-lending of SDRs to support IMF members’ green, resilient and inclusive recovery, as we emerge from the pandemic, in line with Sustainable Development Goals. 

“This support will be complemented by official development assistance (ODA), an ambitious IDA-20 replenishment, the future ADF-16 replenishment in 2022 and the mobilisation of scaled-up concessional financing from the IMF, MDBs and funds, as well as bilateral development agencies. We ask the MDBs to mobilise more private financing into Africa by developing and reinforcing the relevant risk-sharing instruments.”

Contacted for comment on why Zimbabwe did not attend the summit, a spokesperson for the Finance ministry asked The NewsHawks to contact the Foreign Affairs ministry. Constance Chemwayi, spokesperson for Foreign Affairs, did not pick calls. Questions sent to Reserve Bank of Zimbabwe governor John Mangudya were not responded to at the time of going to print.

This multilateral effort will be closely articulated with the network of African Public Development Banks (PDBs), mobilising the African Development Bank (AfDB) as well as sub-regional and national public financial institutions.

“To relieve African economies suffering from external public debt vulnerabilities, G20 and Paris Club creditors are acting upon the agreement as stated in the April G20 FMCBG communiqué, and in the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI) adopted in November 2020”, the declaration reads.

“We call for the swift decision on and implementation of a general allocation of IMF’s Special Drawing Rights (SDRs), unprecedented by its size (US$650 billion), that is expected to increase reserve assets of African countries by US$33 billion. We urge countries to utilise these new resources transparently and effectively.”

France will use its political gravitas to influence other European countries to back the proposal.

History shows that there is a long-standing “gentlemen’s agreement” under which the IMF managing director is European and the World Bank president is American. 

There is no mention of the director’s nationality in the IMF’s Articles of Agreement, which state only that the director is appointed by the organisation’s executive board. 

The voting rules are set such that countries with the highest “quotas” — a measure of the size of their economy and economic viability — are given preference for membership.

In practice, for most of the IMF’s history, this has meant that the United States and Western Europe have dominated the board.

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