Zimbabwe is set to get an injection of around US$1 billion, its allocation of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF) today, with part of the money earmarked for health, manufacturing, agriculture, education and mining.
IMF member countries started getting their shares of the
new special issue SDRs totalling about US$650 billion yesterday.
The IMF has made the new issue of paper gold to help the
global economy cope with the major setback caused by Covid-19 and the need to
rebuild reserves. The issue is distributed according to each country’s
shareholding in the IMF.
SDRs are not a currency, but an international reserve asset
created by the IMF to supplement official reserves of member countries.
They can provide countries with liquidity, and with
Zimbabwe’s economic growth expected to hit about 7,8 percent this year, the SDR
allocation is expected to play a critical role.
Finance and Economic Development Minister Professor Mthuli
Ncube told The Herald yesterday that the SDRs should “be in our account by
tomorrow”.
“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 Prof
Ncube.
“So we will invest the SDRs in the health, agriculture,
education, roads, industry and manufacturing, mining sectors, and supporting
the vulnerable.
“In terms of the health sector, we 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.”
Prof Ncube said the IMF’s declaration that Zimbabwe will
have access to deploy almost US$1 billion in SDRs, “is just the booster this
economy needs”.
“This move is a truly encouraging vote of confidence from
the international community in the new Zimbabwe, its reforms, and its positive
direction.”
For education, 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.
Turning to social protection, Prof Ncube said 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.
“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. There are three sub-sectors within Zimbabwe’s productive sector
which require 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. 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.”
Profits could then be used to repay debts and further
invested in the most advanced techniques and technologies.
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.
Earlier this year, the Zimbabwe Leather Sector Strategy
(2021-2030) was launched as the Second Republic sees it as a low-hanging fruit
given the country’s competitive advantage in livestock and crop production,
which are key sources of raw materials.
In terms of the mining sector, Prof Ncube said the gold
sector was another area with huge potential, with small-scale producers digging
and panning about 60 percent of national gold output.
The 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.
This will help the Government plug leaks to smugglers and
other illicit buyers, while supporting the young small-scale miners who need
support and capital. The support will also allow a more transparent process for
the purchasers of the gold, improving the Know-Your-Customer process as the
lack of clarity has been a potential impediment to sector growth.
Small-scale miners have challenges operating when it is
raining as they do not have water pumps,while others would want hammer mills
and compressors to boost their operations. Hiring such equipment gobbles most
of their revenue, resulting in some of them entering into slave contracts with
investors or sponsors who in return for leding the equipment demand the miners
sell the gold to them.
Usually, such investors do not sell the gold to Fidelity
Printers and Refiners, which prejudices the country of both the mineral and
revenue.
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.
“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 Prof Ncube.
Herald
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