SMP talks remain in limbo

Kudzai Kuwaza

NEGOTIATIONS over the recalibration of the Staff-Monitored Programme (SMP) remain in limbo after government and the International Monetary Fund (IMF) team failed to reach consensus.

An IMF team jetted into Zimbabwe last year for talks with government after the country fell far short of the reforms expected by the Bretton Woods institution.
The IMF team did not issue a communique as is the usual practice after their engagement with government officials during their visit. Sources close to the discussions say this indicates the talks have not been concluded.

A source who spoke to businessdigest this week said the absence of a communique after the meeting was “very strange.”The meeting follows Zimbabwe’s failure to meet the set targets of the initial SMP. Government’s failure to meet the agreed targets due to unrestrained fiscal expenditure and massive growth in money supply has been a source of dissatisfaction for the Washington-based multilateral financier.

The IMF has already raised a red flag over the country’s failure to meet targets on inflation and government’s controversial spending, especially on deals with Sakunda Holdings, a company linked to President Emmerson Mnangagwa’s backer, Kuda Tagwirei. Government has admitted that it failed to meet the targets set out in the initial SMP but feels that the process can still continue.

The SMP is an informal arrangement between the government and the IMF to monitor the implementation of key economic programmes in the country and is designed to support Zimbabwe’s reform agenda.

“The lack of a communique suggests that the two parties did not reach an agreement during the IMF team’s visit last month. It signals that there are still gaps in the negotiations,” a source told businessdigest. “However, there is still goodwill on both sides to find a solution to the gaps that still exist and the IMF team could return in either February or March.”

In a prior meeting since the agreement to carry out the SMP, the IMF painted a grim picture of the current economic situation in the country and was critical of government’s disastrous fiscal consolidation measures, which have resulted in a volatile exchange rate and hyperinflation.

The IMF said urgent measures needed to be taken to address the situation. “Policy actions are urgently needed to tackle the root causes of economic instability and enable private-sector led growth. The key challenge is to contain fiscal spending consistent with non-inflationary financing and tighten monetary policy to stabilise the exchange rate and start rebuilding confidence in the national currency,” the IMF said in a statement after its visit in September last year.

In his 2020 budget, Finance minister Mthuli Ncube said he had missed fiscal reforms targets under the Transitional Stabilisation Programme (TSP) and SMP.

The SMP covers the period May 15, 2019 to March 15, 2020. Ncube, according to sources, will meet IMF managing director Kristalina Georgieva when he attends the World Economic Forum to be held in Davos, Switzerland, beginning on Tuesday next week where they are expected to discuss the SMP.

Efforts to get a comment on the issue from finance secretary George Guvamatanga were futile as he did not respond to calls and questions sent to him.

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