ZIMBABWE was spared expulsion from the International Monetary Fund on Wednesday when the executive board gave Harare another six-month grace period. <
Although Harare survived expulsion, the international financier said that there was need for the country to implement a comprehensive plan in areas such as the exchange rate, fiscal and structural reforms.
“Recognising the severity of the decision at hand, the increase in payments from Zimbabwe since the last review in July 2004, and some improvement in economic policies, the executive board decided to postpone a recommendation with respect to compulsory withdrawal,” the IMF board said.
Expulsion from the IMF is rare and only the former Czechoslovakia has ever been thrown out of the institution’s ranks in 1954.
Decisions to expel member countries are made by the IMF’s powerful board
of governors which usually includes ministers of finance or central bank governors.
Compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members that fail to meet their obligations under the Articles Agreement.
Unlike last year’s July meeting where central bank governor Gideon Gono and acting Finance minister Herbert Murerwa represented Zimbabwe, at Wednesday’s meeting none of the two were in Washington.
Yesterday Murerwa was ecstatic over the decision by the IMF.
“It’s a positive development, it’s wonderful news,” he said.
Murerwa could not be drawn to comment further on concerns raised by the IMF on the need to adopt and implement a comprehensive adjustment programme as a matter of urgency in “certain areas of fiscal, monetary and exchange rate policies and structural reforms”.
The board said that it will consider the managing director’s complaint regarding the compulsory withdrawal from the Fund within six months or “at the time of the executive board’s discussion of the 2005 Article IV consultation with Zimbabwe, whichever is earlier”.
The latest decision by the board gives the country a window of opportunity to strengthen its cooperation with the Fund, with the aim of addressing the economic decline and resolving its overdue obligations prior to the executive board’s next consideration of the managing director’s complaint.
The board noted Zimbabwe’s payments of US$16,5 million since the last review, which it said however fell short of stabilising its arrears, adding that it took into account Zimbabwe’s intention to further increase payments to the Fund from the second quarter of this year.
The Fund however urged Harare to make every effort to increase payments and resolve its overdue financial obligations.
Since 1999, Zimbabwe’s accounts to the Fund have been in the red.
As of this week, Harare’s arrears to the IMF amounted to SDR202 million (US$306 million).
The country’s inflation has declined sharply to 133% from a peak of 622% while the central bank has managed to suppress a thriving illegal market in foreign currency and tighten bank supervision.