Zim, IMF talks underway

Debra Matabvu

ZIMBABWE and the International Monetary Fund (IMF) have begun preliminary discussions aimed at enrolling the country under the multilateral lender’s Staff-Monitored Programme (SMP), a development expected to restore Harare’s reputation and credibility with international lenders and unlock foreign investment.

An SMP is an informal agreement between a country and the IMF staff to monitor the implementation of economic programmes.

It does, however, not entail financial assistance.

If successful, the SMP would allow Zimbabwe to demonstrate a credible track record of sound economic policies, which is a key step towards unlocking access to affordable financing from international financiers.

The programme is also key for the country’s debt resolution and arrears clearance programme.

IMF Resident Representative Dr Carlos Caceres told The Sunday Mail that the “Fund staff is working closely with the authorities on defining the key parameters and modalities of the SMP”.

“These include adjusting the fiscal position to avoid a recourse to monetary financing and new arrears and building foundations for a durable fiscal consolidation; fiscal risks residing off-budget (including from the operations of the Mutapa Investment Fund); the effectiveness of the monetary policy framework for the ZiG (Zimbabwe Gold); and reforms to strengthen economic governance.

“The main objective of the potential SMP for Zimbabwe is to build a track record of sound economic policies,” he said.

“This will help spearheading Zimbabwe’s re-engagement process with international creditors — with a view to achieving debt resolution and arrears clearance — as the SMP is a cornerstone of the economic reform pillar within the Structured Dialogue Platform.”

The SMP, Dr Caceres said, is expected to last no more than 18 months, depending on Zimbabwe’s policy implementation record.

“SMPs last for a minimum of six months,” he added.

“They are not expected to exceed 18 months.

“The duration depends on a country’s previous track record and the measures needed to establish an adequate record of policy implementation . . .

“As stated in our latest press release, the IMF continues to provide policy advice and extensive technical assistance in the areas of revenue mobilisation, expenditure control, financial supervision, debt management, economic governance, as well as macroeconomic statistics.”

He said success is evaluated based on satisfying the conditions of the programme.

“An IMF financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and a reform plan that is consistent with durably restoring macroeconomic stability; enhancing inclusive growth; lowering poverty; and strengthening economic governance,” he added.

Economist Mr Persistence Gwanyanya said the development is a step in the right direction and a sign of confidence by the IMF in the various measures being implemented by the Government.

“Financial institutions such as the World Bank and the IMF have expressed satisfaction on economic management and recovery measures being implemented by the Government,” he said.

“Government recently introduced the market-determined exchange rate and that is part of the progress. We still have fiscal issues we have to deal with, such as management of fiscal expenditure, revenue enhancement and fiscal rebalance.

“In addition, we also need external assistance such as the SMP.”

Dr Prosper Chitambara, an economist, said the SMP is part of Zimbabwe’s broader engagement with multinational institutions, particularly the IMF.

“The programme will help with accountability in terms of implementation of our macro economy and institutional policy reform agenda,” he said.

“The accountability is key in expediting key reforms that will unlock the potential of the economy.

“Once the economy is performing at its optimal capacity, that will help in generating revenue which will pay off the arrears.”

In Zimbabwe, the IMF has previously carried out two 15-month SMPs, the last of which ended in 2016 and 2019.

The SMP is also part of the country’s debt resolution and arrears clearance plan. The Government has lined up seven bilateral partners, multilateral institutions and private entities to secure financial resources, guarantees and technical support to clear its arrears with international creditors before the next round of debt restructuring and clearance arrears talks resumes.

According to the Public Debt Report released by the Ministry of Finance, Economic Development and Investment Promotion in November last year, Zimbabwe’s external debt stock stood at US$12,4 billion as of September 2024.

Of this amount, US$6,3 billion is owed to bilateral creditors, while US$3,2 billion is owed to multilateral institutions. Additionally, the Reserve Bank of Zimbabwe’s liabilities assumed by the Treasury in 2023 amount to US$2,9 billion. The country’s multilateral debt consists largely of arrears and penalties, which account for US$2,7 billion.

Meanwhile, of the external debt owed to bilateral creditors, arrears and penalties account for US$4,8 billion. In 2022, President Mnangagwa requested former Mozambican President Joachim Chissano and African Development Bank Group president Dr Akinwumi Adesina to facilitate the arrears clearance and debt resolution programme, as well as the political and economic governance reforms process with the creditor countries.

Some of the countries that have used sponsor-backed financial agreements are Greece, Pakistan, Sri Lanka, Zambia and Mozambique.