Zimbabwe urged to stick to fiscal plan

30 September 2012 - 02:12 By JOHN NQINDI
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The Zimbabwean government has been advised to fully implement the measures in its mid-year fiscal policy review to restore financial sustainability and create the fiscal space needed to achieve sustained and inclusive growth.

The International Monetary Fund executive board made these recommendations in consultations with Zimbabwe, which were concluded last week.

In the assessment, the IMF directors said progress on economic recovery has been uneven and the impact of adverse weather conditions on agriculture, an uncertain political situation ahead of elections and a difficult global environment pose further risks to the outlook.

"Responsible authorities should fully implement the measures announced in the mid-year fiscal policy review, and take additional measures if necessary, to address earlier slippages and close the financing gap," read the assessment report.

According to the directors, it is important to rebalance the expenditure mix, especially by containing the growth of the wage bill, to create the fiscal space needed for increased social spending and public investment.

"Improving public financial management would help reinforce expenditure control," read the report. The directors also emphasised the need to enhance transparency in the diamond sector, with timely finalisation and implementation of the Diamond Act, which is key to strengthening revenues and reducing fiscal pressures.

Other issues pointed out included improving the business climate to strengthen competitiveness, building investor confidence and boosting growth potential as an important step to ensuring indigenisation and empowerment policies are implemented in accordance with transparent rules and preserving property rights.

Zimbabwe was commended by the fund for continued improvement in cooperating with it on policies and payments to the Poverty Reduction and Growth Trust (PRGT) as this will allow the lifting of relevant technical assistance restrictions, making it possible to advance towards negotiating a staff-monitored programme (SMP) to support the country's reform efforts.

"Directors commended the authorities on meeting the outstanding marker on steps towards removing irregularly hired workers from the payroll, which allowed the initiation of a stock-taking on the feasibility of the SMP," read the report.

Most directors back the lifting of technical restrictions.

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