THE anticipated International Monetary Fund (IMF) Special Drawing Rights (SDR) allocation have capacity to transform the Zimbabwean economy and offset the adverse impacts of Covid-19, experts have said.
The experts’ comments come after the Minister of Finance and Economic Development, Professor Mthuli Ncube, indicated that Treasury will deploy its share of close to US$1 billion equivalent of SDRs to support economic recovery and key social programmes for vulnerable groups.
“We will use what it is targeted for. We expect the IMF to issue a guidance note in terms of the usage of SDRs. It’s really to support economic recovery and social sectors.
“We will do the same and support health, education, vaccine acquisition and social protection programmes, but also we need to invest the money in future growth so that it supports the real economy,” said Minister Mthuli recently in Parliament.
“So we want to invest in positive rate of return projects and sectors to support the economy, and finally we will have to use a portion to stabilise our currency and build our reserves.”
SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves and provide liquidity when experiencing balance of payment challenges.
The IMF has indicated a US$650 billion SDR that will be released this August as one of the measures to limit economic pressure caused by the Covid-19 pandemic especially in developing countries.
Of the amount, Zimbabwe is expected to receive around US$1 billion and experts say this is a welcome development at a time the economy is constrained due to the negative effects of Covid-19 pandemic.
The analysts said prudent utilisation and prioritisation of such funds remain key to achieve economic turnaround. For instance, key productive sectors of the economy and infrastructure development should be given priority in the allocation of the SDRs.
“SDRs are a welcome finance mechanism for Zimbabwe and the rest of Africa, they are not conditional, a country can utilise the funds as according to their own blueprints,” said Public Policy and Research Institute of Zimbabwe’s Dr Gorden Moyo during a Zimbabwe Coalition on Debt and Development (ZIMCODD) virtual discussion on the IMF SDRs implications to Zimbabwe.
Dr Moyo said the Covid-19 pandemic worsened economies in developing countries that were already in distress. As such, the IMF financial facility comes at an opportune time, and prudent utilisation of such can transform the economy, which is expected to develop into an upper middle income economy by 2030.
“We have had this SDRs before, in 2009 when the economy was struggling and it helped keep the economy running. It is the kind of money that if strategically used it can change the economic landscape of Zimbabwe.
“It has also come at a time the country faces health care challenges and impacts of climate change so if properly used we can change lives,” said Dr Moyo adding the SDR should also be deployed towards infrastructure development which is a key economic enabler.
Professor Tapiwa Mashakada said apart from productive sectors, authorities should also strengthen social protection nets at a time Covid-19 has caused disruptions to economic activity.
He said: “People have lost jobs due to the pandemic and are struggling. This SDR should help countries recover from effects of the pandemic. As a country let us also not squander all of it but use it prudently bearing in mind future uncertainties.”
Civil society organisations have also called on transparency in the utilisation of the funds with stakeholders such as the media holding authorities to account while Parliament plays an oversight role. African Forum and Network on Debt and Development (AFRODAD) senior policy analyst Tirivangani Mutazu, said there is need for stakeholder engagement to agree on the priority sectors that should benefit from the SDRs.
“SDRs provide relief for countries and the IMF has stepped in to help lower income economies at a time the pandemic has worsened the situation.
“However, transparency and accountability remains key in the deployment of the funds. There should be debates on utilisation, for instance should it be used to pay part of our debt arrears, will it be used towards the devolution initiative. If deposited into the fiscas, are we likely to see a supplementary budget for 2021 or it will be for 2022. All these issues need to be discussed openly to enhance transparency and accountability with Parliament playing an oversight role,” he said.
Mr Mutazu added the SDRs remain an underutilised financing tool and ideal for developing economies as they are not loans with conditionalities and therefore do not affect the sustainability of member countries’ public debt.