Harare — THE International Monetary Fund has commended Government for taking positive steps towards restoration of relations with the Bretton Woods institution while Denmark and the World Bank have given Harare a total of US$18,7 million to refurbish water and sewage treatment plants with the African Development Bank pledging 2 million euros for the same purpose.

In its report released this week after an Article IV Consultative Mission from March 9-24, the IMF mission led by Mr Vitaliy Karamenko noted that Zimbabwe had taken steps towards re-integration in the international financial system and potentially new loans for reconstruction.

The mission's report to assess economic conditions and the country's policy response will be tabled for an IMF board discussion on Zimbabwe in May amid growing optimism that this could pave the way for restoration of the country's voting rights.

This would enable Zimbabwe to use IMF resources and ultimately open doors for the resumption of much-needed standby arrangements for balance of payments support.

The Article IV mission report paid tribute to the inclusive Government's commitment to fiscal discipline through the adoption of the multiple currency system which would eliminate the monetisation of the budget deficit.

"The mission welcomes the authorities' commitment to eliminate quasi-fiscal activities and implement cash budgeting (matching monthly expenditure to monthly revenue) in 2009. To ensure an improvement in the delivery of public services, the Government would need to mobilise significant donor financial support and contain the wage bill.

"The credibility of the Government's commitment to fiscal discipline is reinforced by the adoption of the multiple currency system because under such a system it is not possible to monetise the budget deficit.

"To facilitate transactions and improve credit availability, there is an urgent need to attune the payments system and banking supervision to the needs of the multiple currency system.

"Accountability and transparency of the Reserve Bank of Zimbabwe should be strengthened. Moreover, the RBZ should refrain from quasi-fiscal operations and focus on core central bank activities."

The report further stated that some structural changes that had earlier been recommended by the IMF had already been implemented and these included price liberalisation, removal of surrender requirements and most exchange restrictions on current account transactions.

The report also hailed the imposition of hard budget constraints on parastatal enterprises and the elimination of the Grain Marketing Board's monopoly.

"Going forward, strengthening the investment climate, ensuring protection of property rights, and maintaining wages at competitive levels will be essential for increasing domestic and foreign investment."

The report also acknowledged the efforts of the recently launched Short-Term Emergency Recovery Programme which focuses on macroeconomic policy and supply-side measures aimed at achieving low inflation, arresting economic decline and improving social conditions.

The positive report comes in the wake of reports from some quarters suggesting that Zimbabwe would never be able to restore relations with the IMF unless it cleared outstanding arrears with the Bretton Woods institution.

It is anticipated that the Sadc summit set for Swaziland on Monday, at which the regional grouping will consider a US$2 billion rescue package for Zimbawbe, will set the tone for future engagement with Harare.

This will most probably help the country settle its arrears with the IMF and outstanding obligations with other multilateral institutions.

Meanwhile, Denmark has committed US$8,7 million to Harare City Council for the refurbishment of the city's water and sewage treatment, Mr Muchadeyi Masunda has confirmed.

The African Development Bank has also pledged 2 million euros while the World Bank last week gave US$10 million to the city for the same purpose.

Harare and other urban local authorities have traditionally relied on the donor community to keep the water and sewer facilities working.

Mr Masunda said Danish Minister of Co-operation Development Ms Ulla Tornaes, who was in Zimbabwe recently, announced during meetings with city officials that her government would immediately give US$4,7 million to revamp the Morton Jaffray and Prince Edward water treatment works as well as the Firle and Crowborough sewage treatment plants.

"We took her to Budiriro where she pledged US$4,7 million. She said she would commit another US$4 million when she returned to her country," he said.

Mr Masunda said the city had impressed on all the donors the need to fund the rehabilitation of the city's water and sewer infrastructure.

Mr Masunda said the Firle and Crowborough sewage treatment works had been down for the past two and half years which meant that raw sewage has been finding its way into the city's water reservoirs hence the huge water treatment bill.

The funds would be channelled to the city through Unicef.

Ms Tornaes was in Zimbabwe to assess the situation following the formation of the inclusive Government, making Denmark the first EU country to engage in dialogue with Zimbabwe.