The International Monetary Fund (IMF) restored voting rights to Zimbabwe on Feb. 22, but any new loans for the cash-strapped country will only be considered once its arrears of about USD140 million to the Poverty Reduction & Growth Trust (PRGT) were paid, an IMF spokesman told IRIN. “With the full settlement of GRA (general resource account) arrears in 2006, and the elimination of multiple currency practices and various exchange restrictions in 2009, Zimbabwe does not have breaches of obligations under the Articles of Agreement … Therefore, the restoration of Zimbabwe’s voting and related rights is fully consistent with the IMF’s rules and procedures,” IMF spokesman Alistair Thomson said. Zimbabwe’s voting rights were suspended in 2003 after the IMF board adopted a declaration of non-cooperation regarding the country’s overdue financial obligations, which meant it was no longer eligible to borrow from the PRGT.
IMF economists, reversing the fund’s past opposition to capital controls, urged developing nations to consider using taxes and regulation to moderate vast inflows of capital so they don’t produce asset bubbles and other financial calamities. It said emerging markets with controls in place had fared better than others in the global downturn. The recommendation is the IMF’s firmest embrace of capital controls and a reversal of advice it gave developing nations just three years ago. The IMF has long championed the free flow of capital, as a corollary to the free flow of trade, to help developing countries prosper. But the global financial crisis has prompted the fund to rethink long-held beliefs. It recently suggested the world might be better off with a higher level of inflation than central bankers now are targeting. “We have tried to look at the evidence and tried to learn something from the current crisis,” said Jonathan Ostry, the IMF’s deputy director of research, who wrote “Capital Inflows: The Role of Controls” with five other IMF economists. The IMF examined capital restrictions tried by Brazil, Chile, Malaysia and other countries, such as explicit taxes on capital inflows, requirements that a portion of foreign capital be held interest-free at the central bank, and various regulations to reduce foreign lending.
The IMF will provide USD3.3 billion to Romania, part of a massive loan aimed at helping the EU member recover from a severe recession. The latest installment brings to USD12.6 billion the money Romania has received under a 24-month loan, IMF said in a statement. The IMF also said its board approved Romania’s request for a waiver on certain performance criteria. John Lipsky, IMF First Deputy Managing Director, said Romania’s austerity plan entailed politically difficult spending decisions. “Additional reforms to strengthen fiscal controls are crucial, including in expenditure commitments, contingent liabilities and public entities outside the central government,” he said in a statement. Lipsky added that Romania must cut deficit in order to move toward its goal of eventually adopting the euro.