Zim fails to stabilise IMF debt

Ngoni Chanakira

ZIMBABWE needs to settle its SDR 200 million (US$295 million) arrears to the International Monetary Fund (IMF) before it can begin to repay its US$350 million debt, it emerged this week.
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In its report on Zimbabwe released last week, the IMF revealed that Zimbabwe had to date paid only US$9 million in the period December to June.


As of December 2003, total external arrears were estimated at US$2 billion, up from US$1,3 billion at the end of December 2002.


Analysts said the arrears could result in the IMF suspending Zimbabwe.

The IMF hinted at this in its report when it “regretted that these payments (US$9 million) were insufficient to stabilise the country’s arrears”.


The executive board decided to postpone a recommendation for Zimbabwe’s compulsory withdrawal from the fund, providing the country with another chance to strengthen its cooperation in terms of economic policies and payments.


The board said it would consider again the (IMF) managing director’s complaint regarding Zimbabwe’s withdrawal from the fund within six months and decide whether to recommend to the IMF board of governors that Zimbabwe be asked to withdraw.


“The board’s decision does not impose further sanctions on Zimbabwe, but rather provides the country with an opportunity to significantly strengthen its cooperation with the IMF, with the aim of addressing its economic decline and resolving its overdue financial obligations, prior to the executive board’s next consideration of the managing director’s complaint,” the IMF said.


When he took over in December, Reserve Bank of Zimbabwe governor Gideon Gono promised that he would make regular payments to the IMF in an effort to wipe out the country’s outstanding debt.


In an interview last week, Gono said the RBZ was trying to settle the debt owed to the IMF and other international and local creditors.


He said this would, however, take some time because foreign currency was not easily available – especially at a time when exports were dwindling and business was experiencing a severe downturn.


“We continue with our scheduled payments that we promised all international and local creditors when I took over,” Gono said. “The IMF issue is rather sensitive and we need to treat them very carefully because we owe them quite a lot. We are making regular payments as promised and we will continue to do so.”


However, in its report last week the IMF pointed out that Zimbabwe’s payments of US$9 million to date were insufficient.


“Zimbabwe has been in continuous arrears to the IMF since February 2001,” the IMF said. “As of end of June 2004 Zimbabwe’s arrears to the fund amounted to almost SDR (special drawing rights) 200 million (US$295 million), or about 56% of its quota in the IMF.”


Last month Gono went on a three-nation economic crusade to the United States (Dallas, Atlanta, Philadelphia, New York and Washington), the United Kingdom (London, Birmingham and Oxford) and Johannesburg, South Africa in a bid to sell his “Homelink” programme to Zimbabweans living abroad.


He urged locals in the diaspora to send money home using official channels instead of the parallel market to which they had become accustomed.


Gono’s trip to Washington focused on week-long discussions with various executive directors, management and staff of the two Bretton Woods institutions, the IMF and the World Bank, while at all other stations, the team focused on the promotion of “Homelink”, an RBZ initiative tailored to suit the needs of Zimbabweans living outside the country who may wish to send money home.


The IMF, in its report, expressed grave concern over the sharp decline in economic and social conditions.


On June 6 2003 the IMF’s executive board concluded the Article IV Consultation with Zimbabwe.


Under Article IV of the IMF’s Articles of Agreement, it holds bilateral discussions with members, usually every year.


A staff team visits the country, collects economic and financial information and discusses with officials the country’s economic developments and policies.


On return to headquarters, the staff prepares a report, which forms the basis for discussion by the executive board.


At the conclusion of the discussion, the managing director, as chairman of the board, summarises the views of executive directors and this summary is transmitted to the country’s authorities.


In its June report, the IMF highlighted that Zimbabwe’s economy had deteriorated progressively over the past four years.


It said real output had dropped by one third, inflation had galloped and social conditions were deteriorating.

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