Zimbabwean Prime Minister

Zimbabwe is headed for “an economic disaster”, the Finance Minister writes IMF

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By Amaka Obi

Zimbabwe has reported 34 coronavirus cases and four deaths and announced that it is extending lockdown for another two weeks. Before the emergence of COVID 19 the world health pandemic, Zimbabwe was struggling with shortages of foreign exchange, medicines and electricity.

And shortly into the lockdown, more than half of Zimbabwe’s 15 million people needed food aid. The president last week promised a $720m stimulus package for troubled companies, but did not mention where the money would come from.

The finance Minister Mthuli Ncube wrote a private letter to the International Monetary Fund (IMF), copied to the World Bank, African Development Bank, European Investment Bank and the chair of the Paris Club of sovereign creditors, stating that it’s debt arrears means it cannot access foreign lenders, and that Zimbabwe needed to start talks and regularize ties with foreign creditors to clear its decades-old arrears and unblock urgently-needed funding

The letter dated April 2, said “if the country failed to get a US$200 million rescue package, it would implode — with grave security consequences for the country and all its neighbors.”

“Cumulatively, Zimbabwe’s economy could contract by between 15%  and 20%  during 2019 and 2020. This is a massive contraction with very serious social consequences,”

“Zimbabwe desperately needs international support,” Ncube said, adding that the pandemic will take a heavy toll on the health sector leading to loss of lives and raise poverty to levels not seen in recent times” 

“Already 8,5 million Zimbabweans (half the population) are food insecure, from Cyclone Idai and successive droughts, health service are inadequate, and poverty levels are rising. These indicators are expected to worsen.

“A domestic collapse also would have potentially adverse regional effects, where spillovers are significant,” Ncube warned further.

He also proposed “a high level and urgent dialogue” with the multilateral lenders to “advance a transformative financial support and arrears clearance plan that can mitigate the looming crisis”.

Due to the country’s default on its debt repayments, The IMF and the World Bank has stopped lending to Zimbabwe since 1999.

As a result the government turned to domestic borrowing and money-printing to finance the budget deficit, and this caused the rise of inflation to 676.39% in March year-on-year, described as one of the highest in the world.

The letter which was leaked, has gotten numerous comments from the people of Zimbabwe and speaking to the local news reporters (Daily News) they expressed that the President and the Finance Minister should resign.

“This letter serves to expose the government’s lies about a surplus. The letter shows the extent of the rot”.

“Both Mthuli and his boss (Mnangagwa) should do the honourable thing and resign…“The problem is that Mthuli doesn’t understand the crisis at hand. He has not lived in the country for many years and is, therefore … out of his depth,” Biti told the Daily News.

In return for external financial support, the minister said, Zimbabwe would undertake political and economic reforms.

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