adminIMF managing director Ms Christine Lagarde approved a staff-monitored programme to oversee implementation of economic policies as a first step towards eligibility for external borrowing.
The programme, covering April-December 2013, is an informal agreement between country authorities and IMF staff to monitor the implementation of the authorities’ economic programme.
Zimbabwe has endorsed the programme, its first in more than a decade which does not entail financial assistance, Ms Lagarde said.
“The SMP supports the Zimbabwean authorities’ comprehensive adjustment and reform programme and has been endorsed by Zimbabwe’s Cabinet, a strong signal of their commitment,” she said.
“A successful implementation of the SMP would be an important stepping stone towards helping Zimbabwe re-engage with the international community. The SMP focuses on putting public finances on a sustain- able course, while protecting infrastructure investment and priority social spending, strengthening public financial management, increasing diamond revenue transparency, reducing financial sector vulnerabilities, and restructuring the central bank.
“In particular, fiscal consolidation efforts aim to move the primary budget balance from a deficit in 2012 to a small surplus in 2013, helping start what should be a gradual rebuilding of fiscal buffers and international reserves.”
Zimbabwe’s external debt has grown to US$10,7 billion and it owes the IMF US$200 million.
“Zimbabwe’s external debt is high and largely in arrears, cutting off the country from access to most external financing sources,” said the IMF chief. “A strong track record of maintaining macro-economic stability and implementing reforms, together with a comprehensive arrears clearance strategy supported by development partners, would be essential for resolving Zimbabwe’s large debt overhang.”
She noted that Zimbabwe had made considerable progress in stabilising the economy since the end of hyperinflation in 2009.
The GDP had grown by an average of over 7 percent and inflation has remained in the low single digits, due to the multi-currency system. Government revenues have more than doubled from 16 percent of GDP in 2009 to an estimated 36 percent of GDP in 2012, allowing the restoration of basic public services.
But the economic recovery had been accompanied by very large current account deficits in recent years, while international reserves remained very low, at around one week of imports.
In 2011 and 2012, sizeable public sector salary increases crowded out spending in key areas.
Those increases, combined with significantly lower-than-expected diamond revenues in 2012, resulted in fiscal stress, including the accumulation of domestic payments arrears, which necessitated significant adjustment in the second half of 2012.
In addition, rapid credit growth combined with slow implementation of financial sector reforms, has exacerbated financial sector vulnerabilities.
“The strong rebound seen after the end of hyperinflation seems to have run its course. GDP growth has moderated from over 10 percent in 2011 to an estimated 4,5 percent in 2012, with marginally better growth projected for 2013, as mining output expands,” she said.
“Going forward, sustaining high growth will require determined efforts at economic reform. In this regard, the SMP already envisages important reforms in public financial management, financial sector regulation and other areas.”
The Government recently adopted the IMF staff monitored programme and this position was communicated by the Chief Secretary to the President and Cabinet, Dr Misheck Sibanda. Finance Minister Tendai Biti said the programme was about showing that Zimbabwe “can be trusted again”.
Online Reporter