Daily News  :: Southern Africa

Harare - Zimbabwe was urged to make sharp cuts in public spending Tuesday to prevent a worsening of its economic crisis after a visit by the IMF to assess whether Harare should be expelled by the global lender.

"Going forward, the key will be first to ensure that sharp cuts are made in real terms in fiscal spending, including quasi-fiscal activity previously undertaken by the Reserve Bank of Zimbabwe," the International Monetary Fund said in a statement after a delegation wrapped up a two-week visit to Harare.

The IMF called for a battery of policies to halt the country's economic crisis, warning Zimbabwe's economy could further deteriorate if veteran President Robert Mugabe's government did not change tack.

"Zimbabwe's economic crisis calls for the urgent implementation of a comprehensive package comprising mutually reinforcing actions," it said.

"Without a fundamental change in policies, prospects are for a continued deterioration in the economic situation.

"A crucial element of this package will be strong fiscal adjustment." The IMF team arrived in Harare on December 3 to assess Zimbabwe's economic health ahead of the global lender's meeting early next year in which it is expected to decide on whether to keep Zimbabwe in its fold.

Zimbabwe, which narrowly averted expulsion from the IMF last September for debt arrears of $295mn through a surprise payment of $120mn, still owes the IMF $125mn.

Czechoslovakia is the only country to have ever been expelled from the IMF.

The former British colony is in the throes of economic crisis characterised by world-record inflation, 70 percent plus unemployment and chronic shortages of basic goods like fuel and the staple corn meal.

The government has consistently failed to put the brakes on public spending.

The IMF said the government should aim to stay within the current 2007 budget, adding that fiscal expenditure needs to be prioritised to ensure adequate food imports, an urgent improvement in health infrastructure, and well-targeted social safety nets to protect the poor.

The government should also address the needs of those affected by HIV and AIDS and a controversial government anti-slum drive which left hundreds of thousands without shelter, the lender added.

Central bank governor Gideon Gono told AFP earlier this month that he was confident Zimbabwe would avert expulsion from the IMF after talks with the delegation over the country's long-outstanding arrears.

Since August, the central bank has pegged its exchange rate at 250 Zimbabwe dollars against the greenback, yet on the parallel market the same unit fetches 2,700 dollars.-Sapa-AFP