Business Briefs

This is how Mthuli Ncube will spend the US$1bn IMF windfall

FINANCE and Economic Development Minister Mthuli Ncube says Zimbabwe is today receiving close to US$1 billion, its allocation of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), adding that the SDRs “is just the booster this economy needs”.

IMF member countries started getting their shares of the new special issue SDRs totalling about US$650 billion yesterday, and the issue is distributed according to each country’s shareholding in the IMF.

The new issue of paper gold is meant to help the global economy cope with the major setback caused by Covid-19 and the need to rebuild reserves.

SDRs are not a currency, but an international reserve asset created by the IMF to supplement official reserves of member countries.

Speaking yesterday, Mthuli Ncube told The Herald of his excitement and said the SDR allocation will play a critical role in lifting the national economy, with part of the funds earmarked for health, manufacturing, agriculture, education and mining.

“We have about US$1 billion. The idea is that the SDRs will be channelled towards areas that have been affected by Covid-19,” said Ncube.

Below are the summary list Mthuli said he intends the SDRs to cover for Zimbabwe:

  • Government will invest the SDRs in the health, agriculture, education, roads, industry and manufacturing, mining sectors, and supporting the vulnerable.
  • Government will channel the SDRs towards procuring more Covid-19 vaccines. We will also invest in hospital infrastructure especially at our large referral central hospitals, and the equipment for the hospitals.
  • Government is targeting to build at least eight boarding schools in rural areas. These boarding schools were vital to deliver education and a better quality of life for rural children, particularly for low-income groups. The schools will be equipped with state-of-the-art solar-power generation to back up electricity from the national grid.
  • Some of the SDRs will go towards supporting food-for-work and cash-for-work programmes as well as helping those hit hard by the lockdowns.
  • Some vulnerable people, whose livelihoods were devastated by Covid-19 following the imposition of lockdown measures that sought to limit movement, will also get cash transfers.
  • An Agriculture Revolving Fund will be set up to support horticulture businesses that will in turn help Zimbabwe generate more foreign currency from exports. One initiative is to support a ‘Revolving Fund’, which will support flora culture, which is the growing and selling of flowers, blueberries, and macadamia, among other cash crops or water culture crops.”
  • Government will also invest part of the funds in irrigation equipment as part of measures to climate-proof the agriculture sector, already adversely affected by climate change. For the manufacturing sector, a Revolving Retooling Fund will be set up targeting key value chains such as leather.
  • Government wants to invest in at least 10 gold centres across the country, with each centre being a one-stop-shop, which will allow the miner to have access to equipment and transportation and a regulated mechanism through which they can get paid.
  • Other SDRs are earmarked for roads especially in areas where there is potential for tourism, or agricultural sector development. Prof Ncube said the roads should have potential for tolling to enable the country to recoup its investment.
  • The housing sector is also primed to get support as the Government seeks to reduce the housing backlog of about 1,3 million.

Basically, Mthuli Ncube said usage of the SDRs is guided by ensuring that the three sub-sectors within Zimbabwe’s productive sector get urgent investment and upgrading: agriculture, industry and manufacturing, and mining.

“Zimbabwe’s agriculture is historically the backbone of our economy. For many it is all they know. So, we must invest in efficiency, technology, and improving yields.

“It is of the utmost importance however that these funds provide a return; the SDRs must grow, and as they grow they drive the economy in the process.

“We need to stretch the use of the SDRs. We need to support macro-economic stability. Setting aside resources to buttress the currency can ensure that the downward trend in inflation is maintained,” said Ncube.

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