December 18, 2006

Cut spending, IMF warns

President Robert Mugabe's government needed to drastically cut spending and also to prioritise expenditure to ensure adequate food imports, the IMF has noted. It warned that Zimbawe's economic crisis could worsen without fundamental policy changes. An International Monetary Fund (IMF) team promised no immediate help for Zimbabwe's beleaguered economy after spending ten days in the country for annual consultations. But the IMF said the country - now in its sixth year of a recession critics blame on Mugabe's policies - needed to act fast to head off even greater problems. "Going forward, the key will be first to ensure sharp cuts are made in real terms in fiscal spending," the IMF said in a statement. "Fiscal expenditure needs to be prioritised, in particular to ensure adequate food imports, an urgent improvement in health infrastructure and address the needs of those affected by HIV/AIDS and 'Operation Murambatsvina'," said the IMF.
The IMF projects Zimbabwe's economy to shrink by 4.7% next year, in contrast to official forecasts of positive growth. It urged the government to liberalise the foreign exchange market and ease price controls that have worsened shortages. It said the central bank should stop the practice of bailing out state companies and departments outside the national budget, which was helping fuel inflation. "Without a fundamental change in policies, prospects are for a continued deterioration in the economic situation. Uncertainty over property rights continues to depress investor confidence," the Fund said. (News 24, South Africa)

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