Harare — THE International Monetary Fund (IMF) has said Zimbabwe should clear arrears to creditors to enable access to the fund's resources, sending an unambiguous statement the institution was still far from considering a bailout package for the country.

The development suggests that the country would have to make do with limited fiscal resources trickling in from a shrunk economy, which the IMF mission said had experienced a "nascent" recovery since the beginning of the year, as well as from small credit lines so far extended to the private sector by a few African countries and banking institutions.

In a statement issued last week soon after winding off a visit to assess economic progress as well as to discuss a pending mid-year budget review by Finance Minister Tendai Biti, the IMF chief of mission Vitaliy Kramarenko said Zimbabwe needs to settle its account with international creditors to be considered for financial assistance by the Bretton Woods institution.

"Access to IMF financing would require donor financial support for arrears clearance to official creditors and a sustained track record of sound policies," Kramarenko said in the statement.

His remarks reiterated a long-stated IMF position that Zimbabwe should clear all outstanding arrears with the IMF, the World Bank as well as other international institutions to qualify for balance of payments support to help prop up a bankrupt economy that has been sapped by a decade-long economic crisis.

With Prime Minister Morgan Tsvangirai having declared government broke some two months ago, it is clear Zimbabwe's road towards access to meaningful offshore budgetary support is almost impossible, as debt to the IMF will remain a major hurdle towards any form of support from donors and financial institutions.

Elton Mangoma, the Economic Planning Minister, said in March Zimbabwe had no capacity to repay its external debt, including clearing outstanding arrears with the IMF. Major donors and lenders take a cue from the IMF.

Kramarenko's statement came even after the IMF had warned in May that Zimbabwe would remain mired in large financing gaps even if the country heightened efforts aimed at reviving the country's battered economy.

The Bretton Woods institution had snubbed concerted pleas for a financial rescue package by the inclusive government.

It avoided voting to restore Zimbabwe's membership rights at its last board meeting to discuss the country's relationship with the fund, only voting for a partial restoration of targeted technical support in areas that represented a major risk to the implementation of the government's macroeconomic stabilisation program.

Kramarenko said the IMF would "continue to provide policy advice and targeted technical assistance in the context of regular visits".

Although the IMF partially restored technical support to the country, it still kept its purse strings tied, instead indicating the country had to settle overdue financial obligations to its Poverty Reduction and Growth Facility-Exogenous Shock Facility Trust which will come under discussion in November.

Saul Lizondo an IMF Africa department deputy director said in April Zimbabwe had to repay all outstanding debts with the Fund and all international creditors before resumption of lending to the country. Lack of financial support from the IMF and other donors has significantly slowed down economic revival in the country, whose stability since February is technically supported by the ditching of the country's frail currency in favour of offshore currencies like the United States dollars and the South African rand. The lack of financial support from the IMF also means that Zimbabwe is also unable to negotiate any debt rescheduling or relief with international financiers in the absence of a stand-by arrangement with the IMF.

Debt rescheduling is normally negotiated through the Paris Club, an informal group of official creditors, mostly industrialised countries that seek solutions for debtor nations facing payment difficulties.

A statement on the IMF website said the Paris Club and the IMF had "extensive contact, since the Paris Club normally requires countries to have an active Fund-supported programme in order to qualify for a rescheduling agreement".

France recently said it could write off Zimbabwe's debt, but indicated this could only be done under the Paris Club framework.