Tension high ahead of IMF crunch meeting

Source: Tension high ahead of IMF crunch meeting – The Zimbabwe Independent November 29, 2019


Melody Chikono

ZIMBABWEAN authorities will next week meet International Monetary Fund (IMF) officials, amid heightened fears the Bretton Woods institution may pull the plug on a Staff-Monitored Programme (SMP) after government failed to meet set and agreed economic reform targets.

Well-placed sources in government told businessdigest this week that a team of IMF executives will next week meet government officials for the conclusion of negotiations for the calibration of the SMP as Zimbabwe becomes increasingly desperate to fulfil the targets of the economic reform roadmap.

The uneasiness has been caused by Zimbabwe’s failure to meet the set targets of the initial SMP.Government’s failure to meet the agreed targets due to unrestrained fiscal expenditure and massive growth in money supply has been a source of dissatisfaction for the Washington-based multilateral organisation.

Sources said patience with government has been wearing thin. There is a feeling government indicates left and turns right on agreed economic reforms, a source said.

The IMF has already raised a red flag over the troubled country’s failure to meet targets on inflation and government’s controversial spending, especially on deals with Sakunda.

The SMP is an informal arrangement between the government and the IMF to monitor the implementation of key economic programmes in the country and is designed to support the government’s reform agenda.

Government sources said the IMF team is expected next week and will likely be in the country for a week to conclude the Article IV consultations on Zimbabwe.

“IMF officials will be in the country next week to finalise the SMP negotiation and conclude the Article IV. They will be in on Wednesday up to Wednesday next week. Basically, on the SMP it will be about its calibration,” a source said.

During its last visit to Zimbabwe, the IMF painted a grim picture of the current economic situation in the country. It was critical of government’s disastrous fiscal consolidation measures, which have resulted in a volatile exchange rate and hyperinflation.

The IMF said urgent measures needed to be taken to address the situation.“Policy actions are urgently needed to tackle the root causes of economic instability and enable private-sector led growth. The key challenge is to contain fiscal spending consistent with non-inflationary financing and tighten monetary policy to stabilise the exchange rate and start rebuilding confidence in the national currency,” the IMF said in a statement.

The SMP seeks to assist the troubled country to institute key reforms in line with the Transitional Stabilisation Plan, a government economic blueprint, and help build a track record of implementing sound economic policies as part of President Emmerson Mnangagwa’s plan to normalise relations with the international community. In his 2020 budget, Finance minister Mthuli Ncube (pictured) said he had missed fiscal reforms targets under the TSP and SMP.The SMP covers the period May 15, 2019 to March 15, 2020.

Ncube said a challenging macro-economic environment and other shocks caused setbacks on some quantitative targets related to the stock of official international reserves, ceiling on new non-concessional external debt contracted or guaranteed by the central government and ceiling on credit to the non-financial public sector from the RBZ.

Earlier this month, permanent secretary in the Ministry of Finance George Guvamatanga admitted government had failed on the issue of inflation, in line with the TSP.

“The failures have been around inflation. We are out of the inflation target and we are also out of our reserve money target. The growth of money supply has been much larger than what we expected or planned for,” he said.