Zim back on track with IMF

HARARE - Zimbabwe has reached a tentative agreement on an International Monetary Fund (IMF)-staff-monitored programme (SMP) to help it pursue economic reforms and clear its debt arrears, according to Finance minister Tendai Biti.

The southern African country asked for the staff-monitored programme to “accelerate economic growth, step-up the creation of sustainable jobs and help reduce poverty.”

The IMF suspended Zimbabwe’s voting rights in June 2003 as the country’s economy deteriorated and President Robert Mugabe’s government fell behind on debt repayments, but restored those rights in February 2010 in view of a significant improvement in the country’s cooperation on economic policies.

The country, which is slowly emerging from years of isolation, has set up a “Debt Management Office” in Harare to interface with the Paris Club of creditors to discuss ways to deal with its $10 billion debt owed to the IMF, the World Bank and African Development Bank (AfDB).

Zimbabwe has implemented rapid economic and relatively slow political reforms since a coalition government between President Mugabe and Prime Minister Morgan Tsvangirai took over in February of 2009, discarding a worthless Zimbabwe dollar and implementing a largely successful short-term economic recovery programme.

Zimbabwe wants the IMF to monitor its economic and financial reforms, and the deal could lead to the write-off of Zimbabwe’s protracted arrears by the world lender.

Biti said a deal was being brokered under the Zimbabwe Accelerated Arrears Clearance Debt Development Strategy (ZAADS) and will include a waiver on debt.

The debt write-off could help Zimbabwe gain access to fresh capital to shore up its stuttering economy and bankroll urgent infrastructure needs.

“Significant progress has been achieved towards finalising the negotiations with the IMF for the Letter of Intent (LOI), the Memorandum of Economic and Financial Policies (MEFP) and the Technical Memorandum of Understanding (TMoU),” Biti said.

In a move to improve relations with the IMF which used to be a major aid provider, Zimbabwe’s government has opted to allow the IMF more oversight in exchange for a bigger package later.

“I would like to thank Cabinet for its support to this very important programme of re-engaging with our creditors and international financial institutions,” Biti said.

“This will pave the way for starting the process of negotiating for arrears clearance, new financing and debt relief.

“The resolution of our debt overhang will therefore, allow the country to move forward with its economic development agenda, which focuses on inclusive growth, poverty reduction and job creation.”

Biti said Zimbabwe received an IMF team from February 25 to March 1, 2013, where they agreed that under the SMP, the IMF will monitor the implementation of economic and financial reforms with special emphasis on key economic and financial policies and targets.

The reforms include strengthening public finance management, keeping expenditure in check — in line with revenues, increasing spending on capital projects and social services, tax policy reforms, tighter government payroll administration, paying off domestic debt, consolidating reforms at the central bank and tightening governance of the financial sector, increasing exports and implementing a new diamond policy.

According to the IMF website, staff monitoring does not involve any Fund financing.

Besides the IMF, the World Bank and AfDB officials and negotiators for Zimbabwe’s fragile coalition government were also working to finalise an agreement on an aid package.

The ongoing talks reflect a show of economic goodwill to help revive the longstanding Western-Zimbabwean partnership that was strained by a decade of socio-economic and political turmoil.

The IMF and other foreign donors have in the past halted aid over policy differences with Harare, including its controversial forcible redistribution of white-owned farms among blacks.

Zimbabwe has of late sent a clear signal to the multilateral financial institutions of its intention to comply with a tough economic structural adjustment regime if the world lenders write off the $10,7 billion debt.

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