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Clear arrears first, IMF tells Mnangagwa

By Mugove Tafirenyika

President Emmerson Mnangagwa’s administration has put in place a viable plan to turn around Zimbabwe’s economic fortunes, the International Monetary Fund (IMF) has said, but called on the country to quickly clear its foreign arrears first.

Emmerson Mnangagwa at the World Economic Forum in Davos
Emmerson Mnangagwa at the World Economic Forum in Davos

The IMF said it was in talks with Zimbabwe to start monitoring the country’s programmes.

If Zimbabwe secures the deal to enter the so-called staff monitored programme, it would mark a major step towards normalising relations with the IMF, which suspended its voting rights in 2003 over policy differences with ex-president Robert Mugabe and non-payment of arrears.

“IMF staff is currently discussing with Zimbabwe the policies that might become the staff monitored programme which would aim to assist with fiscal consolidation and the reform agenda,” spokesperson Gerry Rice told a regular IMF media briefing on Friday. 

“We think the policies, to answer the question, the policies of the new administration under the Zimbabwe transition and stabilisation programme, do constitute a comprehensive stabilisation and reform effort in order to address Zimbabwe’s macroeconomic situation.

“And, you know, we see it as a fairly ambitious programme that the authorities have requested the staff monitored programme. 

“I’m differentiating that from an IMF financial programme which, of course, discussion of that, as we’ve said here before, would require the clearance of arrears by Zimbabwe to the other international financial institutions as well as an agreement with official bilateral creditors. 

“So, we are looking at a staff monitored programme, but not at this point, the full financial programme for the reasons I just mentioned. …”

Zimbabwe faces a daunting challenge to clear at least $1,8 billion in arrears to the World Bank and African Development Bank before it can start accessing IMF foreign credit, especially for the private sector as well as foreign direct investment.

Mnangagwa has promised to revive the economy, pay foreign debts that the country has defaulted on since 1999 and end the international pariah status that Zimbabwe acquired under Mugabe’s nearly four-decade despotic rule.

But the economy remains in crisis with an acute shortage of cash, fuel, other basic goods, the collapse in the value of the country’s parallel “bond note” currency and many businesses struggling to operate.

Paying debt arrears could potentially open access to financing from the IMF, World Bank and other development institutions, but the United States, which is the bank and fund’s largest member country is an obstacle.

It still maintains sanctions on Harare and is unlikely to support financing for Zimbabwe until the new government makes progress on reforms, including changing laws restricting media freedom and anti-government protests.

At the heart of its economic problems is a $17 billion domestic and foreign debt, a $1,8 billion trade deficit that has worsened dollar shortages and lack of confidence in the ruling party by citizens still traumatised by hyperinflation.

The economic crunch is increasing political tension after a July vote that was supposed to lay the foundation for Zimbabwe’s recovery was instead followed by turmoil that left six people dead after an army crackdown.

The latest crisis was triggered by fiscal and monetary changes announced in October including a 2 percent tax on money transfers and separation of cash dollars and foreign inflows from bond notes and electronic dollars, that caused the collapse of the surrogate currency on the black market. Daily News