17. March 2016

IMF board to determine Zimbabwe’s destiny

The International Monetary Fund (IMF)’s board is expected to meet in May to decide the fate of Zimbabwe’s arrears clearance strategy, expected to facilitate the country’s re-integration in the international community.
If approved, this would pave way for Zimbabwe, which has been unable to access offshore funding due to outstanding arrears to international financial institutions (IFIs) and other lenders, to be considered for new funding from the Bretton Woods institution.
Zimbabwe last year tabled proposals to clear US$1,8 billion in arrears to the World Bank (WB), IMF and the African Development Bank (AfDB) by June this year during IMF and WB annual meetings in Lima, Peru.
Finance Minister, Patrick Chinamasa, last week disclosed that the IMF board would hold its meeting on Zimbabwe on May 2. The board would discuss Harare’s strategy to clear its arrears at this meeting, he said.

The development comes at a time Zimbabwe has met targets for its Staff Monitored Programme (SMPs) which ended in December. Chinamasa said “this will give Zimbabwe a strong track record towards normalising relationships with its creditors and mobilising development partners’ support”.
Chinamasa said strong performance under the SMP would improve Zimbabwe’s repayment capacity and demonstrate that it could implement reforms that could justify a financial arrangement to tackle the country’s deep-rooted problems.
“Our meeting of SMPs targets paves way to negotiate with the three IFIs namely IMF, WB and AfDB,” said Chinamasa.
“That’s a strong statement and a very positive development in the eyes of our creditors. So as we go forward now, the IMF executive board is going to meet on May 2, 2016 to approve or reject our Lima arrears clearance strategy,” he said.
Chinamasa said now that the country had met its SMP targets, Harare would intensify its engagement with development partners that supported Zimbabwe in Lima.
“We need to be very clear: Unless we reach an accommodation with them, we don’t get lines of credit.” “As we clear our arrears, we would want to see whether we are still on the same page with development partners who gave us overwhelming support in Lima.
“We continue to engage them bilaterally and also in some cases multilaterally. We do so in a more intensified manner just to see whether they are still warming to us as we go towards May 2, 2016. You cannot always take these things for granted.” Should Zimbabwe succeed in clearing arrears to the three IFIs by June this year, this would then be followed by engagement with other creditors, such as the European Investment Bank, Paris Club and non-Paris Club members.

The plan, apparently, is to reduce the country’s debt, estimated at US$8 billion, improve the standard of living in the country and spur economic growth.
The debt clearance strategy is, therefore, expected to reinforce Zimbabwe’s commitment towards opening a fresh chapter with its lenders.
Commenting on Zimbabwe’s chances of getting fresh funding from the three IFIs, Chinamasa said: “Yes, we have met our target SMPs, which were essential in order to support the economy, promote macroeconomic stability, address weaknesses in the financial sector and lay the foundation to build our capacity to pay external outstanding debt.
“This means we now have a good track record, but we are not there yet. We are only there in terms of being able to discuss a new financial programme only. But even with the new financial programme, even if they are to give us new money, if they don’t see any capacity to pay in us, they will not give us new money.” (Financial Gazette, Harare)


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