IMF, Zimbabwe mull fresh SMP

HARARE – The International Monetary Fund (IMF) has reached an agreement with Zimbabwe to undertake a second staff monitored programme (SMP) on the southern African country to help it carry out more reforms to stabilise its ailing economy.

“Successful implementation will assist in building a track record and facilitate Zimbabwe’s reengagement with the international community, said Gene Leon, who led an IMF mission to Harare which ended last week.

The team met Zimbabwe’s Finance Minister, Mthuli Ncube to discuss steps towards resolving serious macroeconomic imbalances affecting the country.

He said the proposal was still subject to approval by the Fund’s management.

Whatever policy direction the IMF and the Government of Zimbabwe will pursue is likely to revolve around the Transitional Stabilisation Programme (TSP), a blueprint launched in October to fight economic volatilities stemming out of serious foreign currency and fuel shortages, a huge fiscal deficit and subdued exports triggered by deindustrialisation.

The TSP emphasises fiscal consolidation, the elimination of the Reserve Bank of Zimbabwe’s financing of the country’s fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets.

An IMF statement, quoting Leon, confirmed this strategy.

An SMP involves the IMF’s staff monitoring a country’s economic targets and policies.

There is also another IMF undertaking called an IMF programme, where it provides financial support to a country.

Zimbabwe’s last had such programme between 2013 and 2015. 

Zimbabwe hopes that under the direction of the IMF, it will be able to ride over a debt crisis that has left the country in distress.

The country has paid off its US$110 million debt to the IMF, but cannot access fresh lines of credit until it pays off debts to other multilateral lenders- the World Bank (WB) and the African Development Bank (AfDB).

But under a deal agreed in Lima, Peru in October 2015, at the WB and IMF spring meetings, Zimbabwe undertook to clear the IMF $110 million, WB$1,15 billion and AfDB $601 million by the end of April 2016.

The debt plan was expected to clear Zimbabwe’s arrears, accumulated since the turn of the century, and open up opportunities for fresh loans for the capital starved economy. Former Finance Minister Patrick Chinamasa, who had doggedly pursued the deal, would later change tack, saying although President Robert Mugabe’s government had secured funds to clear the arrears, it now sought to implement economic reforms first, to avoid relapsing into more arrears.

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