THE International Monetary Fund (IMF) has partnered the Reserve Bank of Zimbabwe to restore confidence in the banking sector through ring-fencing and cleaning up balance sheets of struggling banks, IMF head of mission to Zimbabwe Domenico Fanezzi has said.
Although Fanezzi would not be drawn to give details and the processes, the central bank recently set up a special purpose vehicle to assume bad loans.
He told a business conference in Harare on Tuesday that collaborative efforts with the Zimbabwean central bank were already underway to “reform the structure” of the financial services sector.
This follows a July 2014 IMF staff report on Zimbabwe’s first and second review under the Staff Monitored Programme which stated that the country’s financial sector remained vulnerable from high levels of non-performing loans which stood at about 18,5% as at June 2014, low capitalisation and tight liquidity conditions.
Fanezzi said the IMF has support from development partners to reschedule Zimbabwe’s debt which stands at US$9,9 billion.
“We cannot go to the market and sell the debt as IMF and the World Bank cannot do the same; what we can do is debt rescheduling and the debt comprises of debt solutions and this is exactly what we are trying to do,” Fanezzi said.
“We are trying to get the support from donors and development partners to find a way in which the debt could be rescheduled.”
Fanezzi said Zimbabwe must pay US$142 million in arrears to the IMF to be eligible for more credit. The US$142 million has accumulated since the country started its fast track-land reform programme in 2000 which resulted in loss of investor confidence, economic stagnation and a decade of hyper-inflation.
“Let’s be frank, this isn’t much money at US$142 million, but it’s a problem,” said Fanezzi.
The IMF representative also said Zimbabwe needs to address structural challenges that have seen the economy lagging behind while the rest of Africa is growing economically. He said the country needs sound policies to unleash growth potential and improve the lives of its citizens.
“The rest of Africa is experiencing an incredible and fast speed of growth. You should join that and that should be your objective. Don’t think that you are special,” Fanezzi said.
Finance minister Patrick Chinamasa told delegates at the same event that government’s wage bill, accounting for around 76% of total expenditure and crowding out social and capital spending, is “embarrassing”.
Chinamasa said the country needs to deal with corruption to unlock its full economic potential.
“The best way to deal with corruption is increasing transparency and accountability,” said Chinamasa.