Zimbabwe, together with Somalia and Sudan — countries which are destabilised by war and have been declared failed states — are in protracted arrears to the Fund’s poverty reduction and growth trust (PRGT).
The trio made baby steps in reducing total arrears to the fund, paying a combined US$26,51 million and leaving their total balance at US$1,9 billion.
In a report released last week, IMF says while economic policies improved last year, renewed political instability and subsequent policy slippages intensified macro-financial vulnerabilities.
“While tax policy and administration improved significantly, the authorities moved away from cash budgeting, wages and capital expenditures were ramped up, rapid credit growth increased systemic vulnerabilities in the banking system, and serious governance problems remained at the Reserve Bank of Zimbabwe,” said IMF. “So far in 2010, Zimbabwe has made three payments to the Fund totaling US$1,3 million (equivalent to SDR 0,85 million).”
The country’s payments exceeded Zimbabwe’s new obligations falling due for the period and the authorities’ commitment to quarterly payments to the Fund of about US$100 000.
Last year, Zimbabwe paid a paltry US$200 000 to the IMF.
Zimbabwe, which has been in arrears to the PRGT since February 2001, owes the Fund US$134,85 million, which translates to 7% of the total owed by the three countries which are in protracted arrears.
Zimbabwe owes IMF, the World Bank and African Development Bank US$1,4 billion as at the end of June this year.
In May, an IMF team visited the country and the Fund’s executive directors urged the authorities to take corrective action to return to cash budgeting and a path to medium term sustainability.
The directors also urged the authorities to contain the “rising systemic banking risks, and to improve the Reserve Bank of Zimbabwe’s governance.”
“Directors further urged the authorities not to use their SDR holdings to finance budgetary expenditures, and to continue to make timely payments to the Fund and increase them as payment capacity improves,” added IMF. “The Board also noted the benefits of the Fund’s technical assistance provided since May 2009 in targeted areas and decided to add macroeconomic statistics to the targeted areas in which the Fund provides technical assistance.”
IMF directors have also agreed to keep in place the remedial measures that were imposed with respect to Zimbabwe’s arrears to the PRGT and to review the country’s overdue financial obligations to PRGT within six months.
Zimbabwe’s relations with the Fund improved significantly since last year and in February this year the country’s voting rights were restored.