ZIMBABWE: D-day looms as IMF board meets

[ This report does not necessarily reflect the views of the United Nations]

JOHANNESBURG, 8 Sep 2005 (IRIN) - Zimbabwe's Reserve Bank governor has left for Washington in a bid to prevent the country's expulsion from the International Monetary Fund (IMF).

Should the IMF demand compulsory withdrawal, it would be only the second time in history that the Fund has expelled a member.

Compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members that fail to meet their obligations under the Fund's articles of agreement.

Zimbabwe has been in continuous arrears to the Fund since February 2001 and has had its voting rights suspended.

On 16 February 2005 the IMF executive board decided to defer consideration of Zimbabwe's compulsory withdrawal for six months, providing the country with another chance to strengthen cooperation with the Fund in terms of policies and payments.

An IMF staff mission held discussions with the government during a recent visit, after which Zimbabwe made a $120 million part payment of its arrears, now standing at $175 million.

Unconfirmed news reports this week said Reserve Bank governor Gideon Gono might make a further $50 million payment to the IMF to prevent the country's expulsion.

The IMF executive board meets on Friday to discuss Zimbabwe's position.

In 1954, at the height of the Cold War, eastern bloc Czechoslovakia was compelled to withdraw from the IMF for noncompliance with the Fund's articles. The indiscretions included not meeting obligations to consult with the Fund before changing the value of its currency, and failing to provide information to the Fund.

Cuba, the only other nation to withdraw from the IMF, did so voluntarily.

Should the executive board take the momentous decision that Zimbabwe has still failed to meet its obligations, the board of governors, the IMF's highest decision-making body, will vote on the country's expulsion.

The Fund's articles of agreement state that "if, after the expiration of a reasonable period ... the member persists in its failure to fulfil any of its obligations under this Agreement, the Fund may, by a 70 percent majority of the total voting power, suspend the voting rights of the member".

This has already happened in the case of Zimbabwe.

"If, after the expiration of a reasonable period following a decision of suspension ... the member persists in its failure to fulfil any of its obligations under this agreement, that member may be required to withdraw from membership in the Fund by a decision of the board of governors carried by a majority of the governors having 85 percent of the total voting power," the Fund's rules state.

Economist John Robertson told IRIN that it "seems unlikely that there's going to be the 85 percent support needed for expulsion, as there are a lot of African representatives on the board of governors".

The 184-member board of governors consists of a representative of each member country. However, their voting powers are weighted according to a quota formula, which some argue was designed to perpetuate the dominance of a few industrial nations.

For example, the United States has 17.08 percent of total voting power, whereas South Africa has 0.87 percent.

Robertson noted that expulsion from the IMF could have dire consequences for Zimbabwe's already prostrate economy - laid low by policy blunders and withdrawal of western aid.

[ENDS]