Under the Lima plan Zimbabwe agreed to pay the combined $1,8 billion arrears to three preferred creditors—IMF, the World Bank and African Development Bank (AfDB) by the June 30 2016.
To date Zimbabwe has cleared its $108 million arrears to the Fund using special drawing rights and is struggling to raise funding to meet the World Bank ($1,2 billion) and AfDB’s $600 million obligations.
In his presentation at a roundtable meeting at the IMF/World Bank annual meetings in Bali, Indonesia yesterday, Finance and Economic Development minister Mthuli Ncube said the fiscal reform and re-engagements efforts were setting the country back in the arrears
clearance plan and a Staff Monitored Programme—an informal agreement between country authorities and the Fund staff to monitor the implementation of the authorities’ economic programmes.
“We have invited the IMF to carry out Article IV Consultations and a six-month SMP,” Ncube said.
This will be the second SMP inside three years following the end of the first economic reform plan in 2015. IMF managing director Christine Lagarde had in June 2013 approved an SMP following lobbying by the inclusive government as part of its re-engagement with the global lender.
The SMP focused on putting public finances on a sustainable course, while protecting infrastructure investment and priority social spending, strengthening public financial management, increasing diamond revenue transparency, reducing financial sector
vulnerabilities, and restructuring the central bank.
It ran for 15 months. In its review in 2016, IMF said Zimbabwe had met all the benchmarks.
Last month, IMF spokesperson Gerry Rice said reforms required a comprehensive stabilisation and structural reform programme from Zimbabwe and financial support from the international community to provide space for these reforms.
He said the global lender was ready to help Zimbabwe design a reform package that can help facilitate the clearance of external payment arrears to international development banks and bilateral official creditors and that then would open the way for fresh financing from the internal community including potentially the IMF.
“But, again, just to stress as we said before, potential financial support from the Fund is conditional on the clearance of those arrears to the World Bank, the AfDB and financing assurances from bilateral official creditors. We are working with the Zimbabwean authorities in the meantime to provide policy advice and technical assistance that
might help, could help move that process forward,” Rice said.
On the macroeconomic environment, Ncube said government would embark on the gradual reduction in the budget deficit to 6,4 percent of GDP in 2019, 4,3 percent in 2020 and 3,8 percent of GDP by 2021 underpinned by reduction in expenditure through a cut in the wage bill and revenue collection.
Ncube told the round-table meeting the wage bill would be reduced from 18 percent of GDP in 2018 to 16,7 percent in 2019 and 13 percent by 2021. Thereafter, the wage bill will be below 10 percent of GDP.
