Zim must clear $85m arrears: IMF

By Gift Phiri, Chief Writer

HARARE -
Zimbabwe must pay US$85 million to the International Monetary Fund (IMF) to enhance its chances of winning back crucial economic aid from the Bretton Woods institution, the IMF has said.

But analysts say the beleaguered Harare administration could again struggle to clear the arrears due to a crushing foreign currency crisis.

The government — which has constantly defaulted on its commitments to the IMF since 2001 — has been forced to withdraw US$70 million from its Special Drawing Rights (SDR) to meet scheduled IMF financial obligations under the Poverty Reduction and Growth Trust (PRGT), says the latest IMF review of the fund’s strategy on overdue financial obligations.

Zimbabwe’s coalition government has stabilised the economy but has failed to attract the billions of dollars needed to rebuild the devastated economy.

The GNU says it needs at least US$10 billion to tackle economic ruin and put the country on a firm path to recovery and reconstruction.

The latest information from the IMF shows that the southern African country’s arrears to the Bretton Woods institution now stands at US$85,9 million, while the country owes the World Bank $614,6 million, and $376,2 million to the African Development Bank.

The IMF urged Harare to clear the arrears.

“Directors noted cooperation on payments remains poor, and strongly encouraged Zimbabwe to make regular and timely payments to the Fund, and to increase them as the payment capacity improves,” the IMF statement says.

“Directors noted that the Fund attaches the highest importance to Zimbabwe’s prompt settlement of its arrears and urged the authorities to take action to discharge these arrears as soon as possible.”

Clearing the debt also gives Zimbabwe access to US$102 million that was placed in escrow until Zimbabwe clears its debt.

The latest payment to the PRGT was taken from IMF special drawing rights to Zimbabwe under a $250 billion global agreement to shore up the reserves of the IMF’s 186 member countries in the wake of the global financial crunch.

Analysts this week said the cash-strapped government, battling severe foreign currency problems including raising funds to pay over 200 000 government workers and importing food for starving villagers, would likely continue to default on its commitment to the IMF and further alienate the country from the international community.

Finance minister Tendai Biti has been forced to seek a financial bailout from rich neighbour South Africa of $100 million and another $50 million from oil-rich Angola to plug a $400 million hole on the national budget.

A team of International Monetary Fund (IMF) experts that visited Zimbabwe in April on a mission to review the country’s long overdue financial obligations to the PRGT, noted that the southern African country’s was making unrealistic revenue inflow projections.

“They urged the authorities to align the execution of the 2012 budget with realistic revenue forecasts in order to return to a path towards medium-term fiscal and external sustainability, and to increase economic resilience to shocks by improving expenditure management, further strengthening financial sector prudential regulations and their enforcement, and improving the business climate,” the IMF directors report says.

“Directors underscored the importance of refraining from incurring non-concessional liabilities, including using SDR resources, to prevent the further exacerbation of debt distress and unsustainable widening of external imbalances.”

University of Zimbabwe business lecturer Anthony Hawkins said government will as usual not honour its obligations to the Fund, given other pressing requirements and other essential imports this year.

“I do not think there is any intention of paying the outstanding amount,” Hawkins told the Daily News.

Consultant economist John Robertson said, “We lost ability to pay our debts because of the land reform.
 
“We can not pay them back because we have ruined our productive capacities. We have not changed the policies that caused the damage. We have been alienated from the rest of the world.”

Biti said Zimbabwe was on a cash budget, “so this means we are not going to pay off arrears or carry out some of the capital expenditure projects lined up for the year.”

He said government was collecting almost half below targeted revenue, and there was no money to clear off the arrears.

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