Zimbabwe: Tendai Biti is doing a good job as the Minister of Finance

I believe in giving credit were credit is due and in this article I am giving it to Tendai Biti, the Minister of Finance. Some of you readers might be wondering why I am giving him credit when you can't see anything tangible that he has done so far. What he has done so far might not be felt now by the ordinary men on the ground but in the long run it will be felt. The tattered and torn economy that Tendai Biti inherited from his predecessor can not be rebuilt overnight, it has got to be rebuilt precept by precept one day at a time until it reaches the level which can be felt by the ordinary men on the ground. Tendai Biti has started rebuilding the economy and is being successful though not at the rate that can be felt because of some constraints beyond his control. Let me tell you exactly some of the work he has been doing behind the scenes and the results of that work.

Let me point out to you that the relations between Zimbabwe and the IMF had become so bad because Zimbabwe had been in continuous arrears to the IMF since February 2001 and had the only case of protracted arrears to the PRGF-ESF Trust, which amounted to about US$133 million. The remedial measures that had been imposed on Zimbabwe with respect to these arrears were the suspension of technical assistance; the removal of Zimbabwe from the list of PRGF-ESF-eligible countries and the declaration of noncooperation.
Soon after Tendai Biti was sworn into office he set out to have a good relationship with the IMF. He requested for an IMF team to come into the country to conduct consultation discussions with them concerning the country's economic prospects and policies as well as make a review of Zimbabwe's economic situation. The IMF team led by Vitaliy Kramarenko, Mission Chief for Zimbabwe, came into the country from the 9th to the 24th of March and met with Tendai Biti and other senior officials, as well as representatives of civil society and the financial, business, academic, and diplomatic communities. At the conclusion of the visit Vitaliy Kramarenko issued a press release about his assessment. Of interest to me at this point in time in this article is what he revealed concerning the economic environment in Zimbabwe in 2008, the year that most Zimbabweans suffered like paupers. This is what he said,

In 2008, quasi-fiscal activities undertaken by the Reserve Bank of Zimbabwe (RBZ) increased in the context of weak RBZ governance. They are estimated at US$1.1 billion (36 percent of GDP) in 2008, and included election-related expenses, transfers to parastatals, subsidized directed lending, subsidized provision of equipment and fertilizers to farmers, and allocation of foreign exchange at subsidized exchange rates. Besides monetization, these activities were financed by surrender requirements on export proceeds, the retention of foreign exchange earnings of the gold and agricultural sectors in excess of mandatory surrender requirements, a freeze of most foreign currency deposits, external borrowing, and purchases of foreign exchange at the parallel market exchange rates. These large operations unrelated to central banking core activities were conducted in the context of weak oversight of RBZ operations. Key governance weaknesses include lack of enforcement of the RBZ Act’s accountability requirements and noncompliance with the International Financial Reporting Standards.
The central government’s revenue and expenditure effectively collapsed in 2008. With economic decline and hyperinflation eroding the real value of accrued tax liabilities, budget revenue fell from almost US$1 billion (25 percent of GDP) in 2005 to US$133 million (4 percent of GDP) in 2008. Expenditure shrank from about US$1.4 billion (37 percent of GDP) in 2005 to US$258 million (8 percent of GDP) in 2008 causing an almost complete collapse in the provision of public services, including a significant reduction in electricity generation capacity, collapse of water supply, and major disruptions in railway services.

This confirms what I said in a previous article entitled, "Zimbabwe: A nation held at ransom by three men", that Gideon Gono is the man who caused Zimbabweans to suffer at such pathetic levels in 2008. This part of the report will also give you a complete picture of just how bad the economy was when Tendai Biti became the Minister of Finance.
Vitaliy Kramarenko then made the following conclusion, "The short-term macroeconomic outlook is uncertain. The government’s short-term emergency recovery program and the revised 2009 budget contain a number of important macroeconomic and structural policy commitments which, if fully implemented and supported by donor assistance, could lay the foundation for a private sector-led economic recovery in a low-inflation environment. However, there are significant downside risks to the economic recovery due to potential policy reversals."

Soon after the IMF team had assessed the economic situation in Zimbabwe and made a report, the IMF Executive Board made a decision to lift the suspension of Fund technical assistance to Zimbabwe in targeted areas as requested by Tendai Biti and his team. So effective from May 4, 2009, IMF technical assistance could now be provided to Zimbabwe in the areas of (i) tax policy and administration; (ii) payments systems; (iii) lender-of-last-resort operations and banking supervision; and (iv) central banking governance and accounting. The IMF Executive Board said, "In taking this decision, they took into account the following improvements in Zimbabwe,
1.There has been a significant improvement in Zimbabwe’s cooperation on
economic policies to address its arrears problems since the Executive Board reviewed
Zimbabwe’s overdue obligations last January.
2.The Zimbabwe authorities have expressed their commitment to improve
cooperation on payments to the Fund.
3.The government’s forward-looking policy intentions are sound, but their success
mainly depends on the authorities’ ability to sustain political commitment and to
strengthen technical capacity.
4. Zimbabwe has severe capacity constraints in the Fund’s core areas of expertise and so the IMF's Technical Assistance will help alleviate those constraints.
Using Vitaliy Kramarenko's report concerning his findings in Zimbabwe, the IMF Executive Board then made their own assessment and gave advice about what needs to be done for Zimbabwe to have economic growth. You can read that assessment on the following link, http://www.imf.org/external/np/sec/pn/2009/pn0953.htm

Recently, from the 22nd of June 2009 to the 30th of June 2009 the IMF team headed by Mission Chief for Zimbabwe, Vitaliy Kramarenko came to Zimbabwe to evaluate the economic performance in the country as well as to review progress in implementing the government’s Short-Term Emergency Recovery Program, and to discuss the forthcoming mid-year revision of the 2009 budget and the underlying macroeconomic outlook. When they were done they made the following press release statement.

As a result of improvements in macroeconomic policies, a nascent economic recovery appears to be underway. A more liberal economic environment, price stability, a deepening in financial intermediation, and increased access to foreign credit lines underpinned a pickup in economic activity. The public finances benefited from the recovery in economic activity and consumption. The government matched expenditure to revenue during January-May 2009; and significant increases in budget revenue in recent months have made it possible to start implementing nonwage expenditures in critically important social areas.
To sustain positive economic trends and improve living standards, reform and stabilization efforts need to be stepped up. In particular, the authorities would need to create sufficient fiscal space for nonwage expenditures in social spheres and critical infrastructure, establish workable coordination mechanisms for attracting direct donor financing of priority social programs, improve Reserve Bank of Zimbabwe governance, further promote financial intermediation, and strengthen the business climate.
IMF staff will continue to provide policy advice and targeted technical assistance in the context of regular visits. Access to IMF financing would require donor financial support for arrears clearance to official creditors and a sustained track record of sound policies.

This just about sums up the work Tendai Biti is doing to normalise Zimbabwe's relationship with the IMF but that is not the only international financial body he is engaging with, he is doing the same with the World Bank and many other regional financial bodies. At one time he actually went to USA to try and talk to the USA Congressmen who drafted the ZIDERA bill to have it repealed, though he wasn't successful on that mission, he at least tried. The Minister of Finance, Tendai Biti of the ndakiya-kiya fame actually knows what he is doing and is doing his best for Zimbabwe. If I could say the same for everyone in the GNU by now Zimbabwe would have significantly recovered in all areas in a way that ordinary Zimbabweans on the ground can actally feel it. KEEP IT UP TENDAI BITI.