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THE International Monetary Fund (IMF) has announced the approval of a successor Staff-Monitored Programme (SMP) that will cover the period October 2014 – December 2015.This follows the completion of the third review under the SMP with the country. The IMF said the SMP that expired in June 2014 provided an important anchor for Zimbabwe’s macroeconomic policies under difficult political and economic circumstances.
But it also cautioned that there are key risks to the new SMP.
“Key risks to the new programme stem from global commodity price shocks, domestic policy slippages, gaps in policy implementation capacity, and lagging progress in resolving external arrears. While Zimbabwe faces these risks with practically no buffers, the successor SMP aims to rebuild these buffers and strengthen the country’s resilience to shocks.
“Strong macroeconomic policies and debt relief, in the context of a comprehensive arrears clearance strategy supported by development partners, will be essential to address Zimbabwe’s developmental needs,” said the IMF in a statement.
It, however, said if successfully implemented, the new SMP could lead to a debt rescheduling for the country.
“A successful implementation of the SMP would be an important stepping stone toward Zimbabwe’s normalising relations with the international community.
“IMF staff welcomes the authorities’ decision to start discussions with multilateral creditors to address Zimbabwe’s outstanding arrears, and exploring the possibility of debt rescheduling.”
Added the IMF: “Sustaining higher growth and poverty reduction will require comprehensive reforms over the medium term.
The successor SMP aims at laying the foundations for such reforms. The main objective of the new programme is to strengthen the country’s external position, as a prerequisite for arrears clearance, resumption of debt service, and restored access to external financing.
To that end, the authorities will strive to consolidate the fiscal position, eliminating the primary budget deficit by end-2015.
“They will also aim to accumulate international reserves and seek to mobilise international support for resolving the country’s external debt situation. The authorities intend to restore confidence in the financial sector, as well as improve public debt and financial management.
“Finally, the authorities plan to make progress in a number of key structural reform areas in order to enhance the business climate, boost productivity and competitiveness, and build confidence.
“Successful implementation of these reforms will demonstrate that the country can implement the policies that could justify a Fund-financed programme.” — BH24
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derick.khumalo