WELSHMAN NCUBE . . . Zimbabwe's Minister of Industry and Commerce

HARARE – Zimbabwe will use a US$500 million loan from the IMF to boost the economy, a government official said on Wednesday, as new production figures showed factory output had doubled since the new administration came into office eight months ago.

Industry and Commerce Minister Welshman Ncube told business leaders in Harare that the coalition government that had appeared divided over how to use the IMF loan had finally agreed to use the money to repay debt, rebuild infrastructure and to assist productive sectors of the economy such as mining and manufacturing.

"Part of the money will be used to pay off IMF arrears so that we can have access to another IMF loan,” said Ncube, who was speaking at the launch of a Confederation of Zimbabwe Industries (CZI) survey of the state of the manufacturing sector.

“We agreed that $150 million of this money should go towards productive sectors," said Ncube, who also said efforts were underway to resolve a power-sharing dispute between President Robert Mugabe and Prime Minister Morgan Tsvangirai that he said was threatening to undo all the positive work done by the coalition government since February.

Tsvangirai and his MDC party last Friday announced a boycott of the coalition government, unhappy about Mugabe’s refusal to fulfil commitments made under last year’s power-sharing deal that gave birth to the unity government.

The Prime Minister has been touring key southern African capitals to ask the regional leaders for help to pressure Mugabe to meet his part of the power-sharing deal.

Ncube, from a breakaway MDC faction that has not boycotted government, said the dispute between the President and the Prime Minister had unsettled investors who were developing cold feet on Zimbabwe, unsure about the durability of the coalition government and stability of the country.

He, however, said the leadership of the three political parties in the coalition has agreed to meet to resolve their differences.

"We hope that in the next two to three days there will be a meeting of the three leaders to discuss those issues,” said Ncube.

Analysts believe Mugabe and Tsvangirai do not want to see the coalition government collapse because both stand to benefit from its continued existence and say that the Prime Minister’s move to boycott government was merely an attempt to pressure regional leaders to intervene in his dispute with the President.

The coalition government has done well to stabilise Zimbabwe’s economy and analysts say it remains the most viable option to lift the country out of its multi-faceted crisis – a position supported by the CZI survey which showed that policy measures announced by the administration had helped double up industrial production.

The survey showed that capacity utilisation in the manufacturing sector increased from below 10 percent before formation of the coalition government to about 32.3 percent at present.

CZI chief economist Lorraine Chikanya said: "Overall output grew by 110 percent in the first six months of the year. At the beginning of the year there was a positive policy change that saw the government introduce the use of multiple currencies. This policy framework ushered in a breath of life into what was becoming a dying sector."

Chikanya said political settlement had inspired a new confidence in the business community, which saw firms investing US$1.5 billion mainly for plant rehabilitation and expansion.

Factories that had laid off the bulk of the workforce and scaled down the working week to an average two days have gradually extended their working week to five days, according to the CZI survey.

Zimbabwe’s manufacturing sector was once one of the most vibrant in Africa and at its peak accounted for 22 percent of Zimbabwe's gross domestic product and 37 percent of export earnings.

But a decade of acute recession and political turmoil had reduced the sector to a shadow of its former self as investors pulled out sacred of losing their investment in an economy that had the world’s highest inflation rate and suffered shortages of power and raw materials. – ZimOnline