IMF approves Zim debt strategy

HARARE - The International Monetary Fund (IMF) has approved Zimbabwe’s plan to clear billions of dollars in arrears.

Christine Lagarde, IMF Managing Director this week agreed to a staff-monitored programme (SMP) for Zimbabwe to oversee the authorities’ economic reform from April to December this year.

“The SMP supports the Zimbabwean authorities’ comprehensive adjustment and reform programme and has been endorsed by Zimbabwe’s Cabinet, a strong signal of their commitment,” she said adding that a successful implementation of the programme would be an important stepping stone towards helping Zimbabwe re-engage with the international community.

The SPM would help supervise the country’s economic reforms and policies, and facilitate arrears clearance with official creditors.

Last week, Finance minister Tendai Biti was given government’s seal of approval to engage with IMF over the country’s debt.

“We are very happy that the IMF has approved (our debt clearance plan), and that our government has given us the go-ahead,” he said.

Economic experts say the move by IMF marks a major step towards Zimbabwe normalising relations with the international money lender, which suspended its voting rights in 2003 over policy differences with President Robert Mugabe and non-payment of arrears.

While its voting rights were restored in 2010, Zimbabwe has not been able to borrow from international lenders since 1999 when it started defaulting on its debt.

The country’s external debt stands at $10,7 billion.

Lagarde noted that though Zimbabwe has made considerable progress in stabilising the economy since hyperinflation ended in 2009, the strong double-digit rebound in growth appears to have ended, slowing to about 4,5 percent in 2012.

Only marginally better growth of five percent is expected this year as mining output expands.

The southern African country has a large debt burden and most of it is in arrears, preventing the country from tapping external financing.

“In particular, Zimbabwe remains unable to access IMF resources because of its continued arrears to the Fund,” said Lagarde.

 Zimbabwe owed the IMF $125,3 million in loan and interest payments as of May 31.

“Going forward, sustaining high growth will require determined efforts at economic reform. In this regard, the SMP already envisages important reforms in public financial management, financial sector regulation, and other areas,” she said.

 The IMF said its programme would focus on protecting infrastructure investment and priority social spending, strengthening public financial management and improving transparency on diamond revenue.

Restructuring the central bank was also on the agenda.

Lagarde noted that a strong track record of maintaining macroeconomic stability and implementing reforms, together with a comprehensive arrears clearance strategy supported by development partners, will be essential for resolving Zimbabwe’s large debt overhang.

 “IMF staff will remain engaged with the authorities to monitor progress in the implementation of their economic programme, and will continue providing targeted technical assistance in order to support Zimbabwe’s capacity-building efforts and its adjustment and reform programme,” she said.

Last October the IMF relaxed its restrictions on providing consulting support to Zimbabwe as the country moved toward constitutional reforms and showed improvement in economic policy cooperation with the Fund. - John Kachembere

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