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Monday, October 4, 1999 Published at 17:24 GMT 18:24 UK

Business: The Economy

Zimbabwe denies misleading IMF

Zimbabwe has committed a third of its troops to the conflict in DRC

The Zimbabwean government has denied misleading the International Monetary Fund over military spending in the Democratic Republic of Congo to obtain a $200m loan.

The Financial Times of London reported that there was a discrepancy between figures used internally by Zimbabwe's finance ministry and the statistics provided to the IMF.

Zimbabwe told the IMF its spending was $3m a month, while an internal memo said $166m had been spent on funding the conflict since January and June - around $27m a month.

Zimbabwean Finance Minister, Herbert Murerwa, speaking in the Zimbabwean resort of Victoria Falls said the internal memo had been quoted out of context.

He said the memo was designed to advise government ministers on the potential cost of the war in the DR Congo.

Mr Murerwa, who has just returned from Washington, said what he called the "relevant people" had been given an explanation about the memo and were satisfied with Zimbabwe's position.

Another government official told the BBC that the discrepancy may have emerged while converting figures from Zimbabwean dollars into US dollars.

Economic problems

The figure of $27m a month would represent more than 1% of Zimbabwe's total output, and lead to a substantial increase in the country's budget deficit.

The IMF approved a standby loan of nearly $193m in August to aid Zimbabwe's economic development.

The IMF is believed to be seeking clarification of the amount of spending from the Zimbabwe government.

Earlier this year, the IMF withheld credits for Zimbabwe because of concern over land reforms, prices, and the budget.

President Robert Mugabe's government is estimated to have deployed about a third of Zimbabwe's army in the DR Congo.

Loan blocked

The IMF had initially blocked the loan to Harare in the face of evidence that Zimbabwe was stepping up its involvement in the DR Congo conflict.

The loan was approved after the assurances were given over spending.

The financial package, which included an immediate loan of $24m with the rest in standby credit, was designed to tackle severe economic hardship in Zimbabwe, which has an inflation rate of 65% and mounting social problems.

Any suspension of IMF aid would also raise questions about the assistance Zimbabwe receives from other international aid bodies. The World Bank will meet on Tuesday to discuss its loans to Zimbabwe.

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