Clear arrears first, IMF tells Zim

HARARE - The International Monetary Fund (IMF) says Zimbabwe must first clear its more than $150 million debt to the Bretton Woods institution before the country can access any new loans.

Domenico Fanizza, the IMF head of mission to Zimbabwe, told Parliament’s Finance committee on Wednesday that the southern African country must pay overdue payments to be eligible for more credit.

“We will only consider financial assistance only when there is an agreement on how to solve the arrears,” said Fanizza — who is leading an IMF team that is conducting a review of the Staff Monitored Programme (SMP).

He noted that due to the IMF’s strict rules, it would be difficult for the multi-lateral lender to offer more loans unless the previous arrears are cleared.

“Zimbabwe’s arrears are not very large and they could be solved. At the moment we are working with the government and other financial institutions in order to identify a strategy on solving the country’s debt,” added Fanizza.

Economic experts say other financial institutions including the World Bank and African Development Bank are also barred by law from extending loans to Zimbabwe because of outstanding debts. The country has at least $10 billion in external debts.

In 2013, IMF began a staff monitored programme in Zimbabwe, which has been in default to the lender since 1999, aimed at assisting the country to restore its borrowing rights with international lenders by stabilising the economy and clearing decade old arrears.

As part of steps towards mending relations, the IMF last year appointed its first representative to the southern African nation in a decade.

Fanizza said there is need “for deep reforms to get the economy going”, adding that the country must attract foreign direct investment to achieve economic revival. 

“The country currently faces a number of formidable economic challenges, but sound policies can unleash a strong economic potential,” he said.

The IMF team which came into the country last week is making a final review of the staff monitored programme and bring the collaboration possibly to a different level through a new more ambitious programme.

The SMP constitute an important step in the road to normalising relations with international financial institutions, a condition which is essential for seeking bilateral debt rescheduling under the Paris Club umbrella.

Fanizza noted that the current staff monitored programme seeks to increase the country’s capacity to repay by strengthening its external position and to demonstrate that the country can implement policies that could eventually justify a financial programme with the IMF.

“Zimbabwe needs to do other things. In particular, it needs to mobilise support from development partners to help the international partners to define a strategy to clear those outstanding arrears.

“This is by no means a very easy proposition. We should not think that this can be done easily but I think it’s worthwhile trying to do,” he said.

 

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