Finance and Economic Development minister Mthuli Ncube has said that Zimbabwe will negotiate an International Monetary Fund-supervised economic reform programme as it seeks to resolve the over US$14bn external debt
The staff monitored programme will approve the sponsor who would provide bridging funding for Zimbabwe to clear the arrears to the World Bank, the African Development Bank (AfDB) and the European Investment Bank (EIB, Ncube said.
This is a welcome development for the southern African nation has over the years struggled to resolve the arrears crisis.
Zimbabwe has appointed AfDB president Akinwumi Adesina to lead the process as Harare seeks to thaw its frosty relations with multilateral and bilateral creditors.
To its credit, Zimbabwe has walked the talk by making token payments to the World Bank, AfDB and the Paris Club members.
The elephant in the room is reforms—economic and political. That Adesina agreed to lead the arrears clearance process should galvanise Zimbabwe to follow reforms to the latter.
With elections some months away, Zimbabwe is under scrutiny on whether or not it will discard the tight fiscal and monetary stance credited for stabilising the local currency for political expediency.
Ncube said last week that the tight monetary and fiscal stance would continue until month on inflation is below 3% and that trend is sustained in the next four months. The central bank has hiked the bank policy rate to 200% from 80% as part of measures to stop borrowing for speculative purposes.
Fiscal authorities have tightened the screws on government suppliers, scrutinising every invoice amid revelations they were creaming off the government by charging extortionist prices.
Government officials that abet corruption by playing the midwife role in inflating prices risk prosecution while suppliers will be blacklisted in future transactions.
The debt overhang is a heavy load Zimbabwe has carried over the years. It has made life difficult for citizens as financial institutions struggle to get lines of credit.
Where they get the lines of credit, the perceived country risk has been factors increasing the cost of borrowing. The increase in the cost has been passed on to individuals and companies.
The President Emmerson Mnangagwa’s administration has been pushing Zimbabwe’s re-engagement with the international community under the banner “friend to all and enemy to none”.
That mantra alone, though laudable, is not enough as it has to be accompanied by some housekeeping issues. Undertaking economic, political and governance reforms sends a clear signal that Zimbabwe is ready to be readmitted into the international fold following several years of isolation.
The current trajectory should be maintained. Adesina’s efforts should not go in vain as Zimbabwe gets a last chance saloon to resolve the logjam.
