There is yet to be an official statement from the International Monetary Fund (IMF) after Zimbabwe missed a June deadline to remit diamond cash to the Treasury, raising doubts about the country’s ability to implement a debt relief plan.
The end of June was the deadline for regulations to be in place to control the flow of remittances from the diamond sector. This was in the wake of repeated concerns by the then Finance Minister Tendai Biti, that no cash was being funneled into the national coffers from diamond mines.
The deadline was part of an agreement between the IMF and Zimbabwe, called a Staff Monitored Programme (SMP), signed at the beginning of June. The SMP, which ends this December, was agreed to by the IMF as part of efforts to support Zimbabwe’s plans to pay off its massive international debt, which stands close to $11 billion.
As part of the agreement, Zimbabwe said it would issue a ‘Statutory Instrument’ and a report “accounting in detail for the diamond dividends, royalties and other diamond-related cash flows received in 2012 by Treasury from all enterprises in joint venture partnerships with ZMDC involved in the diamond industry,” the government told the IMF.
But more than two months since the end of the deadline, a ‘Statutory Instrument’ has still not been issued, raising concerns about whether Zimbabwe will be able to undertake the other reforms it promised before December.
The situation has added to high concerns about Zimbabwe’s economic future, which the World Bank has said remains “uncertain.” In its Economic Briefing for September, the World Bank said that Zimbabwe’s 2014 outlook is bleak, saying “growth in Zimbabwe is rapidly fading… with little prospects for a recovery in 2014.”
Economics Professor Tony Hawkins explained that Zimbabwe’s economic forecast is influenced by different factors, including external forces like commodity prices. He explained that internally, uncertainty has been created by many issues, including the recent elections and the concerns about the IMF debt relief plan.
“It was quite clear to me that it (the SMP commitments) would never be met, particularly not anytime soon, and therefore we are on a back foot,” Hawkins said.
He explained that Zimbabwe needs to make “ground shaking” changes to its economic policies, particularly regarding the controversial indigenisation laws that have scared off many foreign investors.
“The government has to start with changes to indigenisation because we need foreign direct investment desperately,” Hawkins said.
He added that the elections have made the economic situation even more desperate, after ZANU PF promised massive debt cancellations, financial investment and job creation while it was electioneering.
“This isn’t going to happen and another crisis of expectation has been created… It really is a pie in the sky situation and promises have been made that no one knows how they are going to be financed,” Hawkins said.