(Reuters) - Zimbabwe has reached agreement with the
International Monetary Fund (IMF) on a programme of economic policies and
structural reforms that could pave the way to the crisis-hit country
re-engaging with international financial institutions.
Suffering from decades of decline and hyperinflation,
Zimbabwe has not been able to borrow from international lenders since 1999,
when it started defaulting on its debt. It has arrears of around $2.2 billion
with the World Bank, the African Development Bank and European Investment Bank.
“Zimbabwe is facing deep macroeconomic imbalances, with
large fiscal deficits and significant distortions in foreign exchange and other
markets, which severely hamper the functioning of the economy,” Gene Leon,
leader of the IMF staff team, said in a statement.
Zimbabwe is also facing the challenge of responding to
drought and the devastation from Cyclone Idai, Leon said.
Under the agreement with the IMF, policies will focus on
eliminating the government’s double-digit fiscal deficit and adoption of
reforms to allow market forces to drive the functioning of foreign exchange and
other financial markets.
Leon said the agreed policies can be expected to remove
distortions that have held back private sector growth, but gave no specific
targets for the reduction of the deficit or other objectives.
He also did not say if and when any fresh IMF financial
support would be forthcoming.
Zimbabwe had on Tuesday appealed for $613 million in aid
from local and foreign donors to cover food imports and help with a
humanitarian crisis following Cyclone Idai.
Leon had met with Finance Minister Mthuli Ncube, Reserve
Bank of Zimbabwe (RBZ) Governor John Mangudya and other officials in a
continuation of talks which aim to implement a set of policies facilitating a
return to economic stability.
Leon said in a statement released late on Wednesday the agreement
is subject to review by the IMF’s management.
“Successful implementation ... will assist in building a
track record and facilitate Zimbabwe’s reengagement with the international
community,” said Leon.
The IMF said in its world economic outlook this week that
Zimbabwe’s economy will contract 5.2 percent this year. This would be the first
time that the economy will go into recession since 2008, when the economy
shrank by 16.5 percent at the height of hyperinflation.
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