Zimbabwe to use IMF funds to support struggling currency | Business and Economy News
The government will withhold $ 500 million from the IMF’s $ 961 million to support the currency which has plunged.
Zimbabwe will use more than half of the $ 961 million allocated by the International Monetary Fund in the form of special drawing rights to support its struggling currency.
The government dropped a 1: 1 peg between a reintroduced precursor to the Zimbabwean dollar and the greenback in February 2019. The currency is now trading at 85.82 per US dollar and even lower on the black market, a drop that has made it difficult for the government. to have it accepted locally, and it is generally not negotiable outside the country.
“For currency support, we want to hold back around $ 500 million,” Zimbabwe’s finance minister Mthuli Ncube said on Tuesday.
The southern African nation ditched the Zimbabwean dollar in 2009 after inflation hit 500 billion percent, according to the IMF, and legalized trade in a range of currencies, including the US dollar and the South rand. African. The economy had collapsed after a failed land reform program launched in 2000 that saw the seizure of white-owned commercial farms and the subsequent collapse in export earnings.
Zimbabwe’s remaining SDRS will be used to support the acquisition of Covid-19 vaccines, investments in schools, hospitals and roads and other priorities, Ncube said. Revolving funds will also be set up to help manufacturers and mining companies buy new equipment and to revive the horticultural industry by encouraging the cultivation of roses, macadamia nuts and blueberries, he said.
The IMF has injected a record $ 650 billion in reserve assets to boost confidence and foster the resilience and stability of the global economy in the wake of the devastation caused by the coronavirus pandemic. Reserves are allocated to the fund’s 190 members, of which around 70% goes to the Group of 20 largest economies and only 3% to low-income countries.
Zimbabwe will not use any of its reserves to repay more than $ 8 billion in external debt, even though its arrears have effectively prevented it from borrowing more money from multilateral lenders.
Ncube also confirmed that the government is considering borrowing money from private creditors to compensate white farmers. Bloomberg first reported on the funding option on August 16.
Compensation for farmers
Zimbabwe has agreed to pay farmers $ 3.5 billion, half of which is due in July next year, to settle the two-decade-old dispute that has soured relations with Western countries, including the United States. United and the United Kingdom.
“The idea is a special-purpose vehicle from which we can then raise resources on the back of some stranded tax revenue from specific sources that are quartered,” Ncube said, adding that the tax could take the form of royalties. mining. .
Zimbabwe exports platinum, gold, nickel and chromium.
Another proposal under consideration is the local sale of a US dollar bond, the minister said.