Fierce behind-the-scenes battles have erupted in and around the International Monetary Fund (IMF) to ensure Zimbabwe is not discussed at the annual meetings of the boards of governors of the IMF and World Bank Group in Washington DC on October 3-9 as the debt-ridden country seeks to secure new funding.
By Elias Mambo/Bernard Mpofu
This comes as it emerged an IMF delegation, which was supposed to arrive in Harare last Friday, aborted its visit as the fight over the Lima Plan escalates.
Zimbabwe’s US$1,8 billion arrears clearance plan was initially expected to be discussed on the sidelines of the IMF annual meetings, but this now seems unlikely. The delegation’s no-show could signal the death of the Lima Plan.
Responding to questions from the Zimbabwe Independent yesterday, an IMF spokesperson in Washington DC said “the exact dates of the mission are yet to be finalised”.
“The purpose of the intended mission would be to assess economic developments since the last staff mission in June, follow-up on the policy announcements in the mid-year fiscal policy review (statement) presented by the Minister of Finance last week and the monetary policy statement presented by the (Reserve Bank of Zimbabwe) governor (John Mangudya) earlier today. The team is currently taking stock of these various measures,” said the IMF spokesperson.
Indications are that Zimbabwe will not be discussed at the annual meetings, effectively scuttling the Lima Plan which was endorsed at the annual meetings in Lima, Peru, last year.
The annual meetings are usually held for two consecutive years at the IMF and World Bank headquarters in Washington DC and every third year in another member country.
In a briefing on various countries on September 1, IMF head of communication and spokesperson Gerry Rice said the fund was not discussing a financing programme with Zimbabwe.
“I just want to clarify as I’ve done here before, there is no financing programme under discussion with Zimbabwe at this point,” said Rice.
“The authorities have announced the plan to clear their arrears with the Fund and other international institutions as part of their re-engagement with the international community. They are working on that. Once the arrears would be cleared the IMF’s board would need to meet and approve the normalisation process and any programme negotiation, financial support from the IMF could only begin at that point.”
The last time the IMF deliberated on Zimbabwe was on May 2 when its executive board concluded the Article IV Consultation with Zimbabwe and third review under the Staff-Monitored Programme.
The rescheduling of the visit comes at a time Zimbabwe’s economic crisis is deepening as reflected by tight liquidity conditions resulting from limited external inflows and lower commodity prices. Inflation has also remained in negative territory on the back of a firming US dollar against regional currencies.
“The mission was scheduled to arrive last Friday, but did not come, which could effectively signal that Zimbabwe’s arrears clearance programme could be in jeopardy,” a source said.
However, Zimbabwe effectively put its arrears clearance plan off the rails when cabinet this week rejected austerity measures Finance minister Patrick Chinamasa announced last Thursday, reflecting infighting within government.
Zimbabwe remains in debt distress and international reserves are low.
In May, the IMF said unless the country undertakes bold reforms, the economic difficulties will continue in the medium-term. The multilateral lender added that given the outlook for the global economy, growth is projected to remain below levels needed to ensure sustainable development and poverty reduction.
Some of the key benchmarks for reform include reducing the size of the wage bill to re-orient spending towards priority capital and social outlays; improving debt management; developing a comprehensive public financial management strategy; and strengthening value-added tax policy and key processes in revenue administration; and improving the business environment, including a transparent and consistent application of the indigenisation policy and a new comprehensive land reform programme.
The debt-ridden country has also committed to compensate white commercial farmers who lost farms during the chaotic land reform programme.
Zimbabwe has further failed to come up with viable strategies for the reform of state enterprises which are currently haemorrhaging the cash-strapped Treasury.
In April last year, government launched a joint exercise with preferred creditors — the World Bank, International Monetary Fund and the African Development Bank (AfDB) — to explore options to clear US$1,8 billion in arrears under a plan first proposed last year.
This plan was presented last October in Lima, Peru, and was amended in May 2016 to include repayment of IMF arrears (US$120 million) using Zimbabwe’s Special Drawing Rights resources at the fund; repayment of International Bank of Reconstruction and Development (IBRD) arrears (US$896 million) using a term facility syndicated by the African Export and Import Bank and Lazard Frères; and repayment of International Development Association (IDA) and AfDB arrears (US$260 million and US$601 million respectively) with a bridging facility from Afreximbank to be financed from future IDA development policy operation and AfDB’s transitional support facility.
The arrears clearance plan also includes approaching the Paris Club after the international financial institutions arrears clearance.
While the IMF has welcomed the plan, which initially received broad support internationally, government has been unable to come up with new development plans and private sector-led growth initiatives.
Mangudya yesterday said plans were on course to settle the arrears by December 31 this year, adding that not paying could have far-reaching economic consequences.
“The re-engagement exercise is very important. The sequence is that you only pay when the board is meeting. What we know though is that after the annual meeting of IMF and World Bank that is when they will meet. So for the sake of consistency and for the sake of not wanting to confuse anyone in this country, we said by the 31st of December,” Mangudya said.