Zimbabwe Standard (Harare)
Ndamu Sandu
3 October 2009
The International Monetary Fund (IMF) will later this month review Zimbabwe's overdue debt as it emerged that the country is failing to cooperate on payments to the global lender. Zimbabwe owes the IMF SDR 89 million (about US$139 million) from the Poverty Reduction and Growth Facility -- Exogenous Shock Facility (PRGF-ESF) Trust.
The country was recently allocated US$510 million by the IMF as part of a bail out package for all the institution's members in response to the global financial crisis.
But Finance Minister Tendai Biti and Reserve Bank governor, Gideon Gono have differed on how the money should be deployed. Biti says if used recklessly the money would worsen Zimbabwe's foreign debt.
According to a recent IMF paper -- Review of the Fund's Strategy on Overdue Financial Obligations -- three countries namely Zimbabwe, Somalia and Sudan remained in protracted arrears to the fund as at the end of June 2009.
Protracted arrears are those that have been outstanding for six months or more.
Two members, Somalia and Sudan, have accumulated arrears dating back to the mid-1980s and account for 18% and 75% of total arrears to the fund respectively.
Zimbabwe, which has been in arrears to the PRGF-ESF Trust since February 2001, accounts for the remaining 7%.
In May, IMF decided to lift the suspension of the fund's technical assistance in targeted areas following Zimbabwe's improvement on economic policies.
The latest review is significant as it shows Zimbabwe had "abused" IMF trust when it lifted the suspension on technical assistance, observers said.
This was meant to "address Zimbabwe's arrears problems and the severe capacity constraints in the fund's core areas of expertise that represent a major risk to the implementation of the government's macroeconomic stabilisation program".
"The Executive Board subsequently extended the next review of Zimbabwe's overdue financial obligations to the PRGF-ESF Trust to no later than October 21, 2009," the global lender said.
"Zimbabwe's cooperation with the Fund on economic policies has improved significantly, but cooperation on payments to the fund has remained poor".
IMF's executive board last reviewed Zimbabwe's overdue financial obligations to the PRGF-ESF Trust in January.
But since the last review, Zimbabwe has made two payments to the fund amounting to SDR 44 million (about US$680 000).
IMF said notwithstanding Zimbabwe's commitment to make quarterly payments of US$100 000 starting in July "no such payments have been received to date".
The global lender said Zimbabwe's arrears to the Trust Fund have reduced the amount of resources that would have accrued to the Reserve Account of the PRGF-ESF Trust for the benefit of the fund's low-income members.
"Zimbabwe's arrears to the PRGF-ESF Trust have also reduced the balances available in the Reserve Account, as SDR 74.5 million has been drawn from the Reserve Account to repay PRGF-ESF Trust lenders," the IMF paper said.
Zimbabwe has an external debt of US$5.7 billion which analysts say it will not be able to settle.
Some quarters in the inclusive government are pushing for debt relief under the Heavily Indebted Poor Countries initiative (HIPC) but analysts say without a proper planning on loan contraction even with debt forgiveness, the country can still find itself hamstrung by debt.
Observers say Zimbabwe has been a blend country of International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) for a number of years.
Had Zimbabwe not been in arrears it would have had access to both the World Bank's long-term interest-free loans and grants through its IDA lending window, as well as through the bank's IBRD lending window, which charges interest on loans.
A precondition for HIPC debt relief is that the country should be classified as an IDA-only country.
For Zimbabwe, this means it must be reclassified as a low-income country and therefore also as an IDA-only country before it is eligible for debt relief under the HIPC initiative.
Given Zimbabwe's re-engagement with the international community, and with the necessary political support from the IMF and World Bank boards, a technical case could be made to make it eligible for HIPC debt relief, observers say.
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Most regular citizens don't even know that there is such a thing as an IMF let alone the huge debt owing to it. The Zanu-PF followers only thrive on what bullshit Mugabe feeds them bluffing them about the land being distributed to them whilst he stuffs himself with wealth of that land so much so that he has been sanctioned. He clearly takes great advantage of the masses who do not know of the rotten issues involving himself the reason why there is censorship of news media. So with the unity government in disarray with uncertainties of what MDC are going to do, this IMF debt stays which means Zimbabwe cannot get further assistance and if it remains unpaid, I do not know if the IMF can put a lean on Zimbabwe's assets.
Don't hold your breath waiting for Gono or any other member of ZANU-PF to have anything intelligent to say about fixing this situation. They will only continue to whine about imaginary "sanctions" or a drought or white people or some other lame excuse rather then coming up with a plan to fix the problem. These guys use smoke and mirrors to hide their incompetence from the poor people of Zimbabwe by denying them the information they need to see the truth.
In ignorant cultures it's possible for charlatans to deceive the people with claims of supernatural or divine guidance or racial or cultural superiority to distract the people while their land is being taken or their pockets are being picked. These charlatans sometimes even convince the victims that were it not for them the damage would be worse! That's Zimbabwe under Mugabe today.