AN International Monetary Fund (IMF) team is expected in the country next week for the third and final review of the Staff-Monitored Programme (SMP) upon which Zimbabwe’s arrears settlement plan proposed to multilateral financiers and fresh funding depends on.
The debt-ridden government mapped out a plan at the October 8 creditors meeting in Lima, Peru, to break free from an unsustainable debt trap in a quest to avert an economic implosion.
The country has a debt overhang of US$10,8 billion accrued from both public and private sector. The public debt amounts to US$5,6 billion, split between multilateral financial institutions (US$2,2 billion), the Paris Club (US$2,7 billion) and US$700 million to the non-Paris Club.
The IMF team will be in the country from February 24 to March 11 as it goes for the third and final review of the SMP which ended on December 31 last year.
The visiting team’s agenda is, among other issues, to carry out annual Article IV consultations in the country at a time Zimbabwe, which owes US$1,8 billion to international financial institutions, is hoping to secure support of the Bretton Woods institution to pay off its debts and arrears to unlock new funding under its Lima initiative.
The SMP is an informal agreement between country authorities and the fund staff to monitor the implementation of the authorities’ economic programme.
During an Article IV consultation, an IMF team of economists visits a country to assess economic and financial developments as well as discuss the country’s economic and financial policies with government and central bank officials.
IMF staff missions often meet with top government officials, parliamentarians and representatives of business, labour unions, and civil society.
Economist Brains Muchemwa said government needs to speed up restructuring of parastatals.
“All the revenue-side fiscal gains come to nothing if no immediate reforms are instituted to stop the massive haemorrhage coming from parastatals such as Ziscosteel, National Railways of Zimbabwe, Zupco and Cold Storage Commission ,” he said.
Economist John Robertson said Zimbabwe has not done justice on the amendments of the Indeginisation Act as well as improving the ease of doing business which may result in an unfavourable report from the Bretton Woods institution.
“IMF might give us a good report because we are trying hard but I think we don’t deserve it because we are not trying hard enough. The ease of doing business is still an issue,” Robertson said.
“For example the new Joint Venture Act will make it even more difficult for investors in the country. We have to remove barriers related to business licensing procedure.”
Robertson said the government is yet to make good on its promise to cut the bloated civil service wage bill by 40% and is unlikely to secure US$1,8 billion to clear arrears owed to international funding institutions.
“On the settlement of the arrears where do we find a lender who gives us US$1 billion? Nobody wants to lend us money because we are considered as risk country,” he said. “On reducing the wage bill, we have not been told about the progress.”
According to a September 2015 letter of intent authored by Finance minister Patrick Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya, cabinet was considering turnaround strategies incuding restructuring parastatals to reduce fiscal costs, improve accountability and service delivery. However, nothing has materialised yet.
IMF in its second review of the SMP noted that the Zimbabwe met four of the five quantitative targets for end-June 2015 and all the structural benchmarks for the second review were met.