July 8, 2004

IMF grants 6-month reprieve on expulsion

The International Monetary Fund announced that it had given Zimbabwe a six-month grace period before considering its expulsion from the fund due to huge arrears. The IMF Board of Directors said it granted the reprieve to give the southern African country time to consolidate its economic turnaround, and to resolve its financial obligations. Zimbabwe has been in continuous arrears with the IMF since February 2001, with arrears amounting to $295 million or about 56 percent of its IMF quota as of June 2004. The IMF said the decision to delay recommending a withdrawal - the last step of measures the fund uses against delinquent members - reflected "the severity of the decision at hand as well as the resumption of some payments from Zimbabwe and limited improvements in economic policy."

Zimbabwe's central bank has recently sought to turn around its economy, now in its fifth year of recession. Its consumer price index rose at an annual rate of 450 percent in May, down from a 623 percent peak in January, after Harare targeted a black market for foreign currency. The IMF urged Zimbabwe to adopt sweeping reforms to improve socioeconomic conditions, restore confidence and donor support, and to restart economic growth. It also asked Zimbabwe to increase payments due to the IMF, noting the country has paid in about $9 million in 2004. The IMF said it will reconsider the question of Zimbabwe's expulsion from the fund within six months. Zimbabwe has been without IMF aid since 1999, and several Western donors suspended help following President Robert Mugabe's reelection in 2002.

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