27 September 2012

Zimbabwe: IMF Hails Zim Turnaround Efforts

Photo: IRIN
Hope in Harare.

THE International Monetary Fund's executive board has applauded Zimbabwe for its efforts to turn around the economy and urged the Government to make full and prompt settlement of its overdue financial obligations to the Bretton Woods institution. Zimbabwe owes the IMF's Poverty

Reduction and Growth Trust US$131 million in arrears and has been ineligible to receive support from the trust since September 24, 2001.

In a statement issued by the IMF on Tuesday, the board, which met last Friday at the conclusion of annual Article IV consultations, said there was need to adopt economic and financial policies needed to enable Zimbabwe to achieve economic recovery as soon as possible.

These include fiscal management, reducing financial sector vulnerabilities, improving the business environment as well as addressing concerns on the Indigenisation and Economic Empowerment Act.

"Executive directors welcomed Zimbabwe's economic recovery and stabilisation in recent years.

"Progress has, however, been uneven and the impact of adverse weather conditions on agriculture, an uncertain political situation ahead of elections, and a difficult global environment pose further risks to the outlook," the IMF said.

The board acknowledged Government's intention to initiate quarterly payments as a first step of co-operation with the Fund.

It, however, indicated that such payments would fall far short of the amount required to stabilise the level of arrears to the IMF.

"The executive board indicated that the fund stands ready to co-operate with the authorities in support of efforts to adopt and implement a comprehensive economic recovery programme," read part of the statement.

The executive board is expected to review the matter of Zimbabwe's overdue financial obligations to the fund within three months.

Zimbabwe has been re-engaging the IMF and other multilateral financial institutions as part of the implementation of the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy.

In his Mid-Term Fiscal Policy Review Statement in July, Finance Minister Tendai Biti said Government was already making strides in implementing the ZAADDS, through accelerated re-engagement with creditors including multilateral financial institutions -- the IMF, the World Bank and the AfDB.

The strategy aims at achieving debt relief in the hope of creating opportunities for new financing and normalisation of relations with creditors.

He said that Government would be engaging the multilateral institutions, including the IMF and the World Bank, on the necessary measures to implement the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy.

"A World Bank/IMF Mission was already in the country over the period 13-27 June 2012 focusing on the development of a macro-economic policy framework in support of inclusive economic growth and the sustainable implementation of the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy.

"I am happy to announce the positive outcome of this mission. This will anchor the arrears clearance process and debt relief initiatives, through the implementation of sound macro-economic policies in support of sustained and inclusive economic growth under the Zimbabwe Accelerated Re-engagement Economic Programme (ZAREP): 2012 -- 2015," he said.

Prior to the visit by the IMF team, the launch of the strategy early this year was preceded by a High Level Debt Forum hosted by the African Development Bank in Tunis on March 23, 2012.

The forum culminated in building of consensus among our creditors and other stakeholders, including China, over the process of resolving our external debt and arrears.

This was followed up through a Forum with Development Partners held on the sidelines of the April 2012 IMF/World Bank Spring meetings in Washington DC, which further confirmed support for the resolution of Zimbabwe's external indebtedness.

Zimbabwe first incurred arrears to the IMF in mid-February 2001, and at end August 2001, its overdue obligations totalled SDR 41,3 million (about US$53 million), including SDR 18,9 million (about US$24 million) to the IMF's General Department, and SDR 22,3 million (about US$29 million) to the PRGF Trust.

Due to this development the executive board that met in 2001 and reviewed Zimbabwe's overdue financial obligations to the IMF, declared Zimbabwe ineligible to use the general resources of the IMF, and removed Zimbabwe from the list of countries eligible to borrow resources under the Poverty Reduction and Growth Facility.

The declaration of ineligibility to use the general resources of the IMF is one of the remedial measures that the Bretton Woods institution employs to encourage members to settle overdue financial obligations.

Removing a country from the list of PRGF-eligible countries is a parallel action when a member has overdue obligations to the PRGF Trust.

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