Zimbabwe’s Economic reform programme under threat

via Zimbabwe’s Economic reform programme under threat 10 November 2014

GLOBAL commodity price shocks and domestic policy slippages threaten Zimbabwe’s ability to undertake reforms under a successor International Monetary Fund supervised economic reform programme, the global lender has said.

Last week, IMF approved a successor plan to the Staff Monitored Programme (SMP) — an informal agreement between the country authorities and Fund staff to monitor the implementation of the authorities’ economic programme — to replace the one which ended in June.

“Key risks to the new programme stem from global commodity price shocks, domestic policy slippages, gaps in policy implementation capacity, and lagging progress in resolving external arrears,” IMF said.

“While Zimbabwe faces these risks with practically no buffers, the successor SMP aims to rebuild these buffers and strengthen the country’s resilience to shocks.”

It said strong macro-economic policies and debt relief, in the context of a comprehensive arrears clearance strategy supported by development partners, “will be essential to address Zimbabwe’s developmental needs”.

“A successful implementation of the SMP would be an important stepping stone toward Zimbabwe’s normalising relations with the international community,” IMF said.

Under the successor SMP, Zimbabwe has promised to maintain a fiscal balance with more resources being channelled to capital and social projects instead of salaries. This would also culminate in the slashing of the wage bill.

Zimbabwe also promised IMF to ensure clarity on the indigenisation law to allay the fears of investors in the wake of conflicting interpretations by government ministers. Zimbabwe has also promised to move steps towards resolving the country’s $10 billion external debt.

The non-resolution of the external debt is seen as impeding the country’s efforts to get lines of credit from multilateral financial institutions to reboot the economy.

In September, Finance minister Patrick Chinamasa said the country wished for debt cancellation. If the move does not succeed, Chinamasa said, it would lobby for debt rescheduling.

IMF said its staff would remain engaged with Zimbabwe to monitor progress in the implementation of their economic programme, and “will continue providing targeted technical assistance in order to support Zimbabwe’s capacity-building efforts and its adjustment and reform programme”.