IMF Disburses US$1 Billion Special Drawing Rights Fund To Zimbabwe

HARARE - The country on Tuesday received its US$1 billion allocation of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), with part of the critical recourses set to go toward revamping sectors such as health, manufacturing, education agriculture and minerals resource extraction.

HARARE – The country on Tuesday received its US$1 billion allocation of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), with part of the critical recourses set to go toward revamping sectors such as health, manufacturing, education agriculture and minerals resource extraction. 

The IMF said member countries started getting their shares of the SDRs of about US$650 billion yesterday (Monday). 

SDRs, which are not a currency, are an international reserve asset created by the IMF to supplement official reserves of member countries. They can provide countries with liquidity. 

Finance and Economic Development Minister Professor Mthuli Ncube, yesterday (Monday) said that the SDRs should “be in our account by tomorrow (today)”. 

“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 Mthuli. 

“So we will invest the SDRs in the health, agriculture, education, roads, industry/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.” 

Mthuli said in the education sector, Government is targeting to build at least eight boarding schools in rural areas in line with the aspirations of the National Development Strategy 1 (NDS1). 

NDS1, whose major focus is to drive infrastructure development targeting healthcare, roads, energy and education, will help Zimbabwe to attain Vision 2030 of an empowered upper middle income society. 

Mthuli added that some vulnerable people, whose livelihoods were devastated by Covid-19 following the imposition of lockdown measures that sought to limit movements, will also get cash transfers. 

An Agriculture Revolving Fund will also be set up, said Mthuli, to support horticulture projects that will in turn held Zimbabwe generate more foreign currency through exports. Government will also invest part of the funds in irrigation equipment as part of measures to climate-proof the agriculture sector. 

Mthuli added that for the manufacturing sector, Revolving Retooling Fund will be set up targeting key value chains such as leather. 

In terms of the mining sector, Mthuli said the SDRs will be targeted to benefit small-scale miners, who have been contributing immensely to gold output. 

Small-scale miners have challenges operating when raining as they do not have water pumps, while others would want hammer mills and compressors to boost their operations. 

Hiring the services of such equipment gobbles most of their revenue, resulting in some largely remaining small, and/ or entering into slave contracts with investors who have the equipment, on condition they sell the gold the investors. 

Usually, such investors do not sell the gold to Fidelity Printers and Refiners (FPR), which prejudices the country of both the mineral and revenue that accrues from its sale abroad. 

Mthuli said gold centres will also be supported with funds to boost their operations. Others funds are earmarked for roads especially those roads that can have tolling to enable the country to recoup its investment while the housing sector is also primed to get funding and some funds will be for contingency plans. 

“We need to stretch the use of the SDRs. We need to support macro-economic stability, and the stability of our own local currency becomes very important,” said Mthuli. 

A basket of currencies defines the SDR: the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound. 

To date, SDR 660,7 billion (equivalent to about US$943 billion) have been allocated, including the largest-ever allocation of about SDR 456 billion (equivalent to about US$650 billion) approved on August 2 this year. 

The IMF said the latest allocation is to address the long-term global need for reserves and help countries cope with the impact of the Covid-19 pandemic. 

In a statement released yesterday, Kristalina Georgieva, managing director of the IMF said the allocation is a significant shot in the arm for the world and, if used wisely, can be a unique opportunity to combat this unprecedented crisis. 

She added that the allocation will provide additional liquidity to the global economic system – supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt. 

Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis, according to the IMF in previous communication. 

Ms Georgieva said the SDRs are being distributed to countries in proportion to their quota shares in the IMF. 

“This means about US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion – equivalent to as much as 6 percent of GDP in somecases.” 

According to Georgieva, to support countries, and help ensure transparency and accountability, the IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability. 

“The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time,” she said. 

To magnify the benefits of this allocation, the IMF is encouraging voluntary channelling of some SDRs from countries with strong external positions to countries most in need. 

Over the past 16 months, some members have already pledged to lend US$24bn, including US$15 billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries. 

This is just a start, and the IMF will continue to work with our members to build on this effort, Georgieva said. 

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