Source: Zim successfully concludes third SMP | The Herald May 5, 2016
Happiness Zengeni and Conrad Mwanawashe
The International Monetary Fund has approved Zimbabwe’s Staff Monitored Programme and Article IV consultations laying a solid foundation for full re-engagement with international financiers under a process which includes the clearance of arrears to multilateral creditors, a fund-financial arrangement and debt treatment under the Paris Club.The approval was done by the IMF’s Executive Board, which met on Monday, May 2.
In a statement, the IMF said all the quantitative targets for end-December 2015 had been met. These included the floor on the primary cash balance and the net international reserves target which were met with comfortable margins.
During the 15-month period of the SMP, the country also made remarkable progress in a number of areas which include the recapitalisation of the Reserve Bank of Zimbabwe through the Debt Assumption Act, amendment of the Reserve Bank and Banking Acts and the establishment of the Zimbabwe Asset Management Corporation.
In the same period, the country amended the Labour Act, instituted reforms to the fiscal regime for the mining sector and developed a strategy to reduce the public service wage bill by 2019.
The successful conclusion of the third SMP paves way for Zimbabwe to work on and present a financing strategy for the country. Government expects to complete drafting a debt clearance strategy by September when the board meets again.
Zimbabwe’s total debt stood at$10.68 billion in December while it has to settle almost $2 billion in arrears. As soon as the arrears are settled, the process to consider removal of the remaining remedial measures which would include the restoration to the Poverty Reduction and Growth Trust (PRGT).
The IMF said Zimbabwe requires implementing deep economic policy adjustment agenda to address the country’s daunting economic challenges.
While commending Zimbabwe for the successful implementation of economic policies under the staff-monitored program despite difficult domestic and external circumstances, the IMF board of directors at its meeting on Monday noted that a step-up to a comprehensive economic policy adjustment agenda will be critical for the country.
In this context, the IMF said that achieving a sustainable fiscal position requires a significant reduction in the wage bill, while rebalancing the budget toward much-needed infrastructure investment and social outlays to stimulate growth, among other measures.
Other measures that the IMF recommended include the need to accelerate the reform of state-owned enterprises, strengthening public financial management, and enhancing transparency in the mining sector.
The Bretton Woods institution stressed the importance of stepping up structural reforms to raise potential growth and living standards, and to secure support from Zimbabwe’s development partners and highlighted the need to implement the indigenisation policy in a business-friendly and transparent manner, and to resolve outstanding land issues swiftly.
Other priorities include improving the investment climate, tackling corruption, and promoting economic diversification.
Government is in the process of improving the doing business environment and reviewing the cost of doing business to encourage investment into productive sectors of the economy.
Furthermore, the IMF called on Zimbabwe to pursue a strong debt management strategy, including by limiting non-concessional borrowing to critical growth-enhancing and poverty-reducing projects that would ultimately improve the country’s repayment capacity given the continued debt distress.
On the country’s comprehensive strategy for normalisation of relations with international financial institutions (IFIs), the board said should clear all arrears to the Poverty Reduction and Growth Trust (PRGT) and other IFIs.