THE International Monetary Fund (IMF) on Wednesday said it would not move an inch from its position that Zimbabwe did not qualify for financial bailouts even after clearing its debts to the global lender in 2016.
In a report that recognised progress towards rebuilding
Zimbabwe’s ailing economy, IMF warned President Emmerson Mnangagwa of lingering
headwinds, saying the southern African country’s debt distress was a source of
worry.
It called on Mnangagwa’s administration to take steps to
cool off jitters stemming from the volatile currency and work towards a string
of reforms necessary to attract foreign direct investment.
Zimbabwe’s external debt was estimated at about US$8
billion at the end of 2020, with the country owing several international
financial institutions including the World Bank, the African Development Bank
and the Paris Club.
The IMF comments followed a virtual Article IV consultative
meeting between Harare and the fund. The IMF team was led by Dhaneshwar Ghura.
It conducted meetings with Finance minister Mthuli Ncube,
Reserve Bank of Zimbabwe governor John Mangudya and other senior government
officials.
“Zimbabwe has been a fund member in good standing since it
cleared its outstanding arrears to IMF in late 2016,” Ghura said in a
statement.
“The fund provides extensive technical assistance in the
areas of economic governance and financial sector reforms as well as
macroeconomic statistics. However, the IMF is precluded from providing
financial support to Zimbabwe due to an unsustainable debt and official
external arrears,” the IMF noted.
“A fund financial arrangement would require a clear path to
comprehensive restructuring of Zimbabwe’s external debt, including the clearance
of arrears and obtaining financing assurances from official creditors; a reform
plan that is consistent with macroeconomic stability, growth and poverty
reduction; a reinforcement of the social safety net; and governance and
transparency on reforms,” he added.
The position was largely expected, because with a
ballooning debt, Zimbabwe’s risk profile remains high and lenders have been
sceptical to continue pumping more funding as a result of default risks.
Without external funding, Harare slipped into a gruelling
humanitarian crisis that saw over 500 000 workers lose jobs last year due to
COVID-19-induced lockdowns, according to the World Bank.
Almost eight million Zimbabweans relapsed into extreme
poverty since the pandemic broke out last year, forcing companies to wind up
operations as government rolled out hard lockdowns.
However, the IMF also predicted that Zimbabwe’s gross
domestic product (GDP) will grow by 6% this year, owing to a good agricultural
output, increased energy production, and the resumption of greater
manufacturing and construction activities.
It was the second time in a week that international lenders
gave Ncube’s reforms a thumps up, after the World Bank predicted 3,9% growth
last week.
Ghura also urged government to improve the co-ordination of
fiscal, foreign exchange and monetary policies, while addressing
COVID-19-related economic and humanitarian challenges.
“In line with the last Article IV consultation, the mission
highlighted that structural reforms aimed at improving the business climate and
reducing governance vulnerabilities are essential for ensuring sustained and
inclusive growth,” Ghura said.
“To this end, the authorities’ strategy and policies as
embodied in their National Development Strategy 1 need to be fully
operationalised and implemented. Durable macroeconomic stability and structural
reforms would bode well for the recovery and Zimbabwe’s development
objectives.”
The fund commended government for its resilience and timely
response towards the COVID-19 pandemic and other natural disasters.
“The IMF mission notes the authorities’ efforts to
stabilise the local currency and lower inflation. In this regard, contained
budget deficits and reserve money growth, as well as the introduction of a
foreign exchange auction system, are policy measures in the right direction.”
Newsday
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