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IMF staff visit report

AN International Monetary Fund (IMF) mission, led by Domenico Fanizza, visited Harare from February 25 to March 9 2015 to conduct the first review under the 15-month Staff-Monitored Programme (SMP) approved by IMF management in November 2014.

Financial Matters IMF Mission

The mission reached a staff-level agreement on policies for the completion of the first review. A report will be submitted for IMF management approval next month. At the conclusion of the visit, Fanizza issued the following statement:

“Despite substantial economic and financial difficulties, the authorities have made progress in implementing their reform programme, meeting all quantitative targets and structural benchmarks for the first review under the SMP.

Moreover, they have stepped up re-engagement with creditors by raising payments to the World Bank and by developing a roadmap to seek debt rescheduling under the umbrella of the Paris Club.

“These developments constitute important steps toward re-engaging with the international financial institutions. The mission welcomes the actions to restore confidence in the financial sector, and the progress to clarify the indigenisation laws, which were modified in January.

In February, in light of improvements in the regime for anti-money laundering and combating the financing of terrorism (AML/CFT), the Financial Action Task Force (FATF) removed Zimbabwe from the list of countries subject to the FATF monitoring process.

“Economic prospects remain difficult. Growth has slowed and we expect it to weaken further in 2015. Despite the favourable impact of lower oil prices, the external position remains precarious and the country is in debt distress.

The authorities are committed to intensifying their efforts to lay the ground for stronger, more inclusive and lasting economic growth. Their resolve to re-engage with the international financial community and to seek its support for the reform process is encouraging. The policy reform agenda consists of the following major areas:

‘Balancing the primary fiscal accounts. The commitment to eliminate the primary fiscal deficit re-affirms Zimbabwe’s intention to further raise its capacity to repay. The top priority is to move resources from a too high wage bill to much-needed capital and social spending.

‘To this purpose, the authorities intend to work toward reducing the share of revenues absorbed by the wage bill. In addition, by amending the Public Finance Management and the Procurement Acts, they will seek to increase accountability, transparency and efficiency in the use of public resources. The reform of the tax regime for the mining sector could go a long way in mobilising additional resources, and continuing to publish audited financial accounts of the mining companies will enhance transparency.

‘Restoring confidence in Zimbabwe’s financial sector. A sound operational framework for the Zimbabwe Asset Management Company is key to freeing the banking system from the burden of high non-performing loans that limit the banks’ ability to extend credit to the private sector and keep the cost of credit high. Moreover, completing the recapitalisation of the Reserve Bank of Zimbabwe (RBZ) will enhance its ability to supervise the banking sector.

‘Improving the investment climate. The authorities plan to publish on the website of the Zimbabwe Investment Authority a simplified summary of the Indigenisation and Economic Empowerment Act. In addition, they are reviewing the 1985 Labour Relations Act to adapt it to the competitiveness challenges arising from a fast-changing global environment.

‘Garnering support for a strategy to clear arrears with multilateral institutions. The authorities plan to step up their efforts to build consensus among all development partners on ways to address these arrears.’

“During this visit, the mission met with Patrick Chinamasa, Minister of Finance and Economic Development (MoFED), Misheck Sibanda, Chief Secretary to the President’s Office and Cabinet, John Mangudya, governor of the RBZ, other senior government officials, and representatives of the private sector, civil society and development partners. The team wishes to thank the authorities and the staff of the MoFED and the RBZ for their hospitality and collaboration.”

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