IMF may extend Zim programme

via IMF may extend Zim programme – DailyNews Live 10 July 2014 by Kudzai Chawafambira

HARARE – The International Monetary Fund (IMF) is likely to extend Zimbabwe’s Staff Monitored Programme (SMP) deadline for the second time as the country has missed a number of targets due to a deteriorating economy.

This comes as in January, the global financier extended the programme by six months following Finance minister Patrick Chinamasa’s request.

On Tuesday, the international financial institution said it would do a third review of Zimbabwe’s performance under the programme — an agreement to monitor the country’s economic policies, but does not involve financial assistance — upon government’s request.

“…a number of quantitative targets and structural benchmarks were not met,” IMF said in a report released this week.

“A successful conclusion of the third review could pave the way to a successor SMP, which the authorities have indicated they may request, to build on their achievements and support a stronger policy framework,” it said.

Overall, the institution said government’s performance under the SMP had been broadly satisfactory and they had taken corrective measures to ensure a track record of policy implementation going forward.

“The SMP provided a useful anchor for Zimbabwe in a difficult election year. However, progress in implementing the programme was slowed by a long electoral process and a protracted post-election transition, as well as an adverse external environment,” it said.

Last month, an IMF management team completed combined first and second reviews of the programme.

Zimbabwe, currently seeking a bail out from the IMF among other international financiers, is implementing the recommended programme under which it is required to enforce sound economic policies.

Under SMP, authorities are compelled to increase diamond revenue transparency, reduce financial sector vulnerabilities, implement debt reduction strategies and restructure the central bank, among other demands.

IMF noted that they would remain engaged with the government to monitor progress in the implementation of its economic programmes and would continue providing targeted technical assistance to support Zimbabwe’s capacity-building efforts and its adjustment and reform programme.

The global financier noted that Zimbabwe’s government  had already began implementing policy measures aimed at addressing the 2014 fiscal gap, improving the quality of public expenditures, enhancing financial sector stability, and moving forward delayed structural reform measures.

“The authorities have reiterated their continued commitment to the policies under the SMP and to enhanced engagement with their creditors and the international community,” noted IMF.

An SMP is an informal and flexible instrument for dialogue between the Fund staff and a member country on its economic policies and is not accompanied by financial support.

The SMP represents Zimbabwe’s first IMF agreement in more than a decade.

Recently, Chinamasa pleaded with Zimbabwe’s external creditors to inject more capital into the country despite a $9,9 billion debt overhang.

He said the hard-pressed southern African country had no capacity to repay its debts due to a worsening economic environment.

“We are engaging our creditors with a view to seeing what measures we can take to alleviate our debt situation.

“In particular, so that we clear the way to attracting foreign direct investment and also persuading them, the very creditors, to grant us money.

“But it’s a very long road, maybe two to three years down the line,” he said.

Chinamasa, however, conceded that it would be hard for Zimbabwe to get fresh capital because it has been failing to service its debt and was negotiating with creditors for an amicable solution. Chinamasa early this year had noted that most of the issues prescribed by the SMP require wider consultations and hence will take time.

“There are also some structural issues which we thought we would have made more progress by now. For example, we are looking at amendments to the Mines and Mineral Act in order to create a legal template which would be conducive for viability in the mining sector. Progress is currently under way and it will take time to address these concerns,” he said.