NDAMU SANDU
The outbreak of coronavirus and the global lockdown have affected discussions between Zimbabwe and the International Monetary Fund (IMF) on the second phase of the supervised economic reform plan.
The proposed second phase of the Staff Monitored Programme (SMP) comes after Zimbabwe missed some of its targets throwing into question Harare’s reform agenda, particularly efforts to resolve the outstanding obligations to international financial institutions.
A senior government official told Business Times that given Covid-19, “everything is on hold”.
Last month, Finance minister Mthuli Ncube said a second phase of the SMP is in the offing to monitor Zimbabwe on the targets it would have set.
“Having completed the Article IV report, they are coming back next month for recalibration and continuation of the second phase of the Staff Monitored Programme.
They are monitoring us on the targets that we set for ourselves in the first place,” Ncube said. “This is not an imposition by IMF on anyone.
We have these targets in our budget; we have monetary targets, TSP [Transitional Stabilisation Programme] targets. So, we will stick to those targets ourselves, with or without the IMF. The IMF is there to tell others that we are sticking to our targets.”
The second SMP is expected to shepherd Zimbabwe to undertake reforms to steer the ship after Harare failed to meet some benchmarks in the initial phase of the economic reform programme.
IMF said the SMP was off-track due to mixed policy implementation. It said that delays and missteps in forex and monetary reforms have failed to restore confidence in the new currency.
The SMP was intended to assist Zimbabwe in building a track record of implementation of a coherent set of economic and social policies that can facilitate a return to macroeconomic stability and assist in reengagement with the international community.
It said notable reforms include a significant fiscal consolidation that has helped reduce the monetary financing of the deficit, the introduction of the new domestic currency in February 2019, the creation of an interbank forex market and the restructuring of the command agriculture financing model to a public-private partnership with commercial banks.
However, the global lender has yet to define the modalities and financing to clear arrears to the World Bank and other multilateral institutions and to undertake reforms that would facilitate resolution of arrears with bilateral creditors.
This continues to constrain Zimbabwe’s access to external official support. “As a result, the authorities face a difficult balance of pursuing tight monetary policy to reduce very high inflation and prudent fiscal policy to address the macroeconomic imbalances and build confidence in the currency while averting a crisis,” the IMF said.
It said Zimbabwe remained in debt distress with large external arrears to official creditors and encouraged the authorities to give impetus to reengagement efforts and debt management and transparency.
“In particular, they [IMF directors] cautioned against continued recourse to collateralised external borrowing on commercial terms as this may potentially complicate any future arrears clearance operation,” IMF said.
The global lender is considered as the international “Commissioner of Oaths” which gives signal to other lenders on a country. Zimbabwe requires cheap lines of credit to help stave off a debilitating foreign currency crisis which stymies growth. As at the end of September 30, 2019, Zimbabwe’s external debt stood at US$8bn which has prevented it from accessing new financing from the international financial institutions, traditional bilateral and commercial creditors. Zimbabwe has in the past come up with lofty plans to resolve the debt crisis but failed to implement the roadmap.
Zimbabwe’s overdue obligation to international institutions is coming at a cost, at a time the coronavirus pandemic is ravaging economies. IMF has responded to the crisis by offering debt relief to members.
On Monday, the global lender gave debt relief to 25 sub Saharan countries excluding Zimbabwe as it does not have a facility with IMF since it also owes other international financial institutions, as exclusively reported by Business Times last month. Zimbabwe also cannot tap into the Fund’s Rapid Credit Facility which member countries utilise to fight the coronavirus pandemic as it owes other international financial institutions.
On Monday, IMF gave Ghana US$1bn under the Rapid Credit Facility to fight the pandemic.
