WHILE the cash-strapped Zimbabwean government is seized with mobilising the international community for financial aid, direct budgetary support and debt relief amid promises to adhere to the International Monetary Fund (IMF)’s Staff-Monitored Programme (SMP), diplomatic sources say Zimbabwe still has much work to do before securing the much-needed assistance.
The development comes at a time a team from the IMF is in the country to assess whether government, whose revenue base continues to shrink as more companies collapse, is sticking to the commitment it made under the IMF’s SMP. The assessment is expected to announce its findings early next week.
Under the SMP, running from November 2014 to December 2015, Zimbabwe committed itself to strengthening its external position as a pre-requisite for arrears clearance, resumption of debt service and restoration of access to external financing.
The government also pledged to consolidate its fiscal position, accumulate international reserves and mobilise international support for resolving the country’s external debt situation, while also restoring confidence in the financial sector and improving public debt and financial management.
In addition, government has promised reforms to enhance the business climate, boost productivity and competitiveness as well as build confidence.
The IMF assessment team has been in Zimbabwe since last week meeting government officials, diplomats and civil society, among other stakeholders.
Diplomatic sources, however, say Zimbabwe would not get the debt relief it desperately needs when the team makes its announcement on Monday on whether the country was on course in meeting its obligations.
“It is way too early for debt relief,” said a diplomatic source. “The team is assessing whether government is implementing the policies it said it would implement to build confidence and credibility.”
After years of playing hard ball with the West while pinning its hopes on the Look East policy, diplomatic sources say government is behind-the-scenes frantically lobbying the European Union (EU), IMF and other international funders for more support.
A former IMF representative in Zimbabwe, Domenico Fanizza, who is in the country leading the delegation, told parliament that the fund could consider financial assistance if an agreement on repaying the arrears is reached.
“… We cannot extend a loan to a country in arrears,” he said.
International monetary institutions have cited bad corporate governance and lack of transparency in government departments and parastatals as some of the stumbling blocks towards funding the government, while also challenging government to clear its debts with multilateral institutions.
The country recently received US$270 million from the EU under the National Indicative Programme (NIP), part of which will be used to enhance its governance and institutional capacity to enable it to attract more funds.
The EU, for example, has highlighted it will not assist Zimbabwe with direct budgetary support until at least 2017 because of its shoddy public finance management systems. Government has, however, expressed willingness to address these concerns and will use part of the NIP funding to enhance its systems.
“The third sector of concentration (of the NIP, which is governance and institutional capacity) covers two sub-sectors; one related to the implementation of the government’s economic reform agenda, and the other related to the consolidation of democracy and rule of law,” said a Western diplomat this week.
“The first component, related to economic reforms, will be implemented through the World Bank-managed Zimbabwe Reconstruction Fund (Zimref), and will focus on public finance management. This includes support to improve budget planning and execution, financial reporting, fiscal transparency and accountability in government finances as well as support to improve the transparency and efficiency of public procurement which will contribute to the implementation of the SMP.”
Officials revealed negotiations between government and Zimref funding partners were still in progress to identify priorities.
An audit of the civil service, officials said, is likely to be a sub-component of the broader programme. The audit will be a precursor to retrenching non-essential staff in the civil service, and also ensure there is no duplication of roles by different government departments.
To restore fiscal sustainability and advance fiscal reforms, Zimbabwe is committing itself to improving diamond revenue transparency as well as reducing public sector wage bill.
Government has pledged to review the Public Finance Management Act in order to strengthen the Ministry of Finance’s financial oversight of state-owned enterprises and local authorities, as well as to amend the Procurement Act to tighten the public procurement framework making it more efficient at delivering value for money.
As a way of rebuilding confidence in the financial system, the authorities pledged to recapitalise the Reserve Bank of Zimbabwe to allow it to focus on its core function. The central bank has also been charged with effectively monitoring troubled banks and tackling the deteriorating quality of assets in the banking system.
On resolving external arrears and resolving external sustainability, Zimbabwe is pledging to seek primarily grants and concessional financing for critical development projects with high economic returns. Before signing any new non-concessional loans, government has pledged to seek a project viability assessment from the African Development Bank, the World Bank or the Development Bank of South Africa.
The country has also resolved to negotiate with multilateral creditors to clear outstanding debt, with the aim of eventually having its debts rescheduled or being granted debt relief.
Zimbabwe has further committed itself to paying regular payments to its creditors, such as the World Bank as well as clarifying the contentious Indigenisation Act which has been an impediment to attracting foreign direct investment.