Finance

Zim’s SMP off-track—IMF

NDAMU SANDU

The International Monetary Fund (IMF)’s economic supervised reform plan for Zimbabwe is off-track due to mixed policy implementation with the Bretton Woods institution imploring Harare to consider asking for technical assistance.

Last year, then IMF managing director Christine Lagarde approved an economic reform plan, the Staff Monitored Programme (SMP), to support Zimbabwe’s reform agenda.

It said the SMP was intended on helping Zimbabwe build 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. 

The SMP runs from May 15, 2019 to March 15.

IMF said Wednesday the SMP was off-track. This came after the IMF Executive Board on Monday concluded the 2020 Article IV Consultation with Zimbabwe.

“They [IMF directors] noted with regret that the Staff‑Monitored Programme was off‑track and underscored the importance of continued engagement between the Fund and the authorities, including through technical assistance, policy advice and other innovative ways, to help immediately stabilise the economy and address the humanitarian crisis,” the global lender said.

IMF said Zimbabwe has undertaken reforms such as 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.

IMF said there was uneven implementation of reforms such as delays and missteps in forex and monetary reforms which have led to low confidence in the new currency. Last year, Zimbabwe made the Zimbabwe dollar as the sole currency after dumping the multi-currency regime that had been in use since 2009.

IMF said despite last year’s efforts to tighten the fiscal stance and contain quasi‑fiscal operations by the central bank, pervasive deficits remain and could be exacerbated by the need to respond to the humanitarian crisis.

“Directors called for non‑essential spending cuts, including decisive reforms to agricultural support programmes, to allow for social spending needs. They underscored the importance of public financial management and enhanced domestic revenue mobilisation efforts,” it said.

IMF said Zimbabwe’s reengagement with the international community continues to face delays as it has not defined 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, it said, would 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,” IMF said.

“While the 2020 budget includes a significant increase in social spending, it is likely insufficient to meet the pressing social needs. Absent a scaling up of donor support, the risks of a deep humanitarian crisis are high.”

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