On Monday, the International Monetary Fund (IMF) started distributing Special Drawing Rights (SDRs), worth approximately US$650 billion, to all its members. This issuance of SDRs is aimed at helping countries recover from the impact of COVID-19.
Zimbabwe expects an allocation of about US$1 billion, based on its quota shares in the IMF.
Here, Finance Minister Mthuli Ncube writes on how he intends to use this money.
With Zimbabwe leading the continent on vaccination figures and the economy stabilising by the day, there is much to look forward to as we continue with our wholesale reforms.
And with the world focusing on vaccinations to the terrible Covid-19 pandemic, Zimbabwe is set to receive its own vital shot in the arm, an economic shot.
Economic growth is already expected to reach around 7,8 percent this year and inflation is dropping by the day.
With this in the background, the IMF’s declaration that Zimbabwe will have access to deploy nearly US$1 billion in special drawing rights, 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.
How we spend these funds is vital. We intend to focus the SDRs (Special Drawing Rights) on areas that support this robust economic recovery and importantly support key social programmes.
Allocation can thus be broken into four main areas:
The social sector; covering health, education, and the social safety nets;
The productive sector; supporting agriculture, industry and manufacturing, and the mining sector;
Infrastructure investments, and
Contingency resources, and foreign currency reserves for supporting macro-economic stability going forward.
These SDRs will therefore target the areas that have been hit hardest by the pandemic, and provide a crucial lifeline to the most vulnerable members of our society, many of whom are yet to the feel trickle down effects of the macro-economic stabilisation.
While the majority of these programmes will roll out simultaneously, perhaps the vaccine acquisition is the most urgent.
Zimbabwe has been one of the most proactive and successful countries in Africa at dealing with the pandemic, and as the uptake for vaccination increases, Government will need to be on the ball with the funds to acquire more.
In the realm of health, the current pandemic has underpinned the importance of upgrading our critical hospital infrastructure, especially our central hospitals.
We will therefore be investing in hospitals across the land, while purchasing new equipment ensuring quick and quality healthcare to many who need better access.
In the realm of the education sector, we want to use these funds to build at least eight new boarding schools in rural areas, building about one school per rural province.
These boarding schools are vital to deliver education and a better quality of life for rural children in particular for low-income groups.
We will be equipping these schools, and others, with state-of-the-art solar power facilities to back up power from the normal grid power.
Crucially, these funds will be used to support emergency measures for the most vulnerable members of society, through what we call productive social safety nets.
Cash/food for Work Schemes will be set up to encourage those who can work to work, whilst utilising the same schemes to support the elderly and disabled who perhaps are unable or can no longer integrate into the workforce.
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/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.
These tend to be export crops with a decent return on investment. Profits can then be used to repay debts and further invest in the most advanced techniques and technologies.
We will also be investing in smallholder irrigation schemes to again support our vulnerable farmers who have been hit hard by Covid.
These are industries which used to thrive in Zimbabwe, but over the years, crucial components of the value chain have been lost. It is in these carefully mapped out areas where we must invest.
There are dams, water bodies and water systems which must be climate proofed and upgraded for modern agriculture for smallholder farmers.
Within industry, manufacturing is vital in terms of job creation. We want to set up a “re-tooling fund” that will enhance our value chains around cotton, leather, pharmaceuticals and agro-processing.
These core components of a healthy industrial economy, the missing links of the value chain, will be brought back to life.
The idea with both the agricultural sector and industry is to leverage private sector funds.
With SDRs in the background providing a form of guarantee, a private sector bank can extend the financing facility to a company that has been identified as a value chain enhancer.
So, it’s not just money from Government or the IMF, but we can use the new climate to leverage private sector support; a public private partnership principle in the deployment of these SDRs.
The gold sector is another area with huge potential for Zimbabwe. Our small-scale producers produce about 60 percent of our gold. We must support these small-scale producers; most of whom are young and entrepreneurial.
The idea, therefore, is to invest in at least 10 “Gold Centres” across the country. Each centre is 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 Government manage leakage, while supporting the young small-scale miners who need help, support, and capital. It will also allow a more transparent process for the purchasers of the gold, improving the Know Your Customer (KYC) process, a potential impediment to sector growth.
Of course, an area that must never be overlooked is infrastructure, in particular housing and road construction. On road construction, we are again looking to see quick and sustainable returns on our investment, developing roads in the areas where there’s potential for tourism, or for agricultural sector development.
And last, but certainly not least, some of these funds will be used to maintain the incredible macro-economic stability which has drawn praise from international institutions and globally-respected economists.
We must continue to build our international foreign currency reserves to support the domestic currency which has performed so valiantly thus far. Setting aside resources to buttress the currency can ensure that the downward trend in inflation is maintained.
Experts, both domestic and global, are predicting a brighter economic future just over the horizon for the people of Zimbabwe.
In conjunction with our friends in the international community, we are confident that we can build on the impressive macro-economic stability we have achieved.
Through the National Development Strategy 1 (NDS 1) we can now firmly focus our efforts on renewed growth and prosperity for the benefit of all our citizens.