The World Bank has warned Zimbabwe to stick to austerity measures and abandon a luxurious spending lifestyle if the country’s economy is to recover.
The nation’s economy is showing signs of strain, sliding into deflation with unemployment levels rising.
World Bank’s Zimbabwe-based economist Nadia Piffaretti on Tuesday told a Sapes Trust conference in Harare that government must have fiscal discipline.
She said the country must “complete successfully the economic programme monitored by the International Monetary Fund (IMF) which includes a prudent fiscal stance, strengthening financial supervision, and progress on capturing of revenues from diamonds”.
Last year, Zimbabwe adopted the IMF’s staff monitored programme (SMP) – similar to the Economic Structural Adjustment Programme – as part of efforts to deal with a burgeoning external debt, and is a key condition to access funding from the international lender.
Zimbabwe owes external creditors an estimated $10,7 billion and the debt has been hindering the country’s efforts to secure loans aimed at stimulating the ailing economy.
Although the IMF has agreed to help monitor the country’s economic reforms and policies, and facilitate arrears clearance with official creditors, Zimbabwe has been showing signs of reneging on meeting the programme’s targets after the country asked for extension – for the second time within a year.
The SMP was initially aimed to run until December 31, 2013 but was extended to June this year “to allow time for the national authorities to strengthen their policies and deliver on outstanding commitments under the programme”.
However, indications are that Zimbabwe could miss the SMP targets due to deteriorating economic conditions in the country.
Finance minister Patrick Chinamasa recently said government was facing mounting economic challenges thereby affecting its ability to meet the Bretton Woods institution’s targets within the deadline.
“It’s clear at this stage, to everybody’s knowledge, that we have not been able to address some of the issues we discussed last year such as employment costs as a proportion of the budget,” he said in March.