IMF approves Zim’s economic reform plan

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NDAMU SANDU

The International Monetary Fund (IMF) management has approved a supervised economic reform plan for Zimbabwe which will establish a track record of policy reforms as the country escalates re-engagement with the Bretton Woods institutions.

Zimbabwe’s re-engagement with the international community is held back by Harare’s failure to settle overdue obligations to the international financial institutions.

The country’s  external debt arrears amount to about US$5,6bn which is split between multilateral creditors (US$2,2bn), the Paris Club (US$2,7bn) and non-Paris Club creditors (US$700m).

The resolution to Zimbabwe’s debt arrears of US$5,6bn requires the country clearing first, and simultaneously, its arrears to the African Development Bank (US$680m), World Bank (US$1,4bn) and US$308m to the European Investment Bank.

IMF’s resident representative to Zimbabwe Patrick Imam said the global lender’s management had approved the economic reform plan which aims to create a track record for challenged economies and should be viewed as a spring board for a deeper IMF engagement down the road that could include a financial support.

“Yes, the SMP was formally approved by our management a fortnight ago. The SMP runs until March next year,” Imam told Business Times.

The Staff Monitored Programme (SMP)—an informal agreement between country authorities and IMF staff to monitor the implementation of the authorities’ economic reform programme—is an informal agreement between country authorities and IMF staff to monitor the implementation of the authorities’ economic reform programme and do
not entail financial assistance or endorsement by the IMF Executive Board.

He said the economic reform plan aims to buttress the Transitional Stabilisation Programme for 2018-20, by stabilising the economy and unlocking Zimbabwe’s economic growth potential.

“The focus is on fiscal consolidation, monetary and exchange rate reforms, as well as structural reforms such as improving the governance and functioning of State-Owned Enterprises. In addition, the SMP will pay close attention to governance reforms,” Imam said.

In his presentation at a roundtable meeting at the IMF/World Bank annual meetings in Bali, Indonesia last year, 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 he invited IMF to carry out Article IV Consultations and a six-months SMP.

This will be the second SMP inside four 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.

Under the 2015 Lima debt and arrears clearance plan that was cobbled at the IMF/World Bank annual meetings, Zimbabwe agreed to pay the combined US$1,8bn arrears to
three preferred creditors—IMF, the World Bank and African Development Bank by June 30 2016.

To date, Zimbabwe has cleared its US$108m arrears to the Fund using special drawing rights and is struggling to raise funding to meet the World Bank and AfDB’s obligations.