IMF defers move to expel Zimbabwe

Zimbabweans face desperate shortages of fuel

The International Monetary Fund (IMF) has delayed its decision on whether to expel Zimbabwe over unpaid arrears.

The fund said it would "revisit" the expulsion issue in six months' time.

A delay would give Zimbabwe "further opportunity to strengthen its co-operation with the IMF", it added in a statement.

The country has been in arrears with the IMF since February 2001 because it failed to pay interest on the $4.5bn (£2.5bn) it had borrowed from the fund.

Last month, it unexpectedly repaid $120m, but needs to find $175m more.

The IMF's executive board added that the partial payment had been a factor in deciding to defer its judgement, as well as the government's "initial policy steps" in the exchange rate and monetary fields this year.

Those changes included raising fuel prices and relaxing a state monopoly on key grain and fuel imports.

Tough choice

Zimbabweans are facing a deep economic crisis, with high unemployment, rampant inflation, and food and fuel shortages.

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An IMF delegation returned to Washington from Harare on Friday last week after assessing progress made by President Robert Mugabe's government.

If the IMF expels Zimbabwe when it reconsiders the issue, it will make it more difficult for the country to borrow money in the future from both private and public lenders.

And it will not be eligible for IMF loans which aim to help countries in temporary economic difficulties - at the price of adherence to strict economic conditions.

Late drive

According to Zimbabwe state radio, central bank chief Gideon Gono had been lobbying hard to avoid expulsion in the run-up to the vote, holding 11th hour meetings with officials from the UK, Africa, France and Germany .

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Government officials have also denied newspaper reports that it raised the $130m to pay off a substantial sum of its arrears by raiding the foreign currency accounts of exporters.

Earlier the county's Finance Minister, Herbert Murerwa, also denied reports in South Africa's Business Day newspaper that he and Mr Gono would present the IMF meeting with a $50m cheque.

"We have already paid $120m and that's all for [the] time being," he told the AFP news agency. "We have paid a significant amount of the loan and we will not be making any payments now."

If Zimbabwe is ejected from the organisation, it will be the first country to be expelled since Czechoslovakia in 1954.