The Sunday News
Roberta Katunga Senior Business Reporter
STRONG macro-economic policies and debt relief in the context of a comprehensive arrears clearance strategy supported by development partners, will be essential to address Zimbabwe’s developmental needs, the International Monetary Fund has said.In a statement, IMF said Zimbabwe’s economy was at crossroads and the economic situation remained difficult.
“Sustaining higher growth and poverty reduction will require comprehensive reforms over the medium term,” said the IMF.
IMF completed the third review under the Staff-Monitored Programme (SMP) with Zimbabwe and approved a successor SMP covering the period October 2014-December 2015.
The previous SMP, which expired in June this year, provided an important anchor for the country’s macro-economic policies under difficult political and economic circumstances and the successor SMP aims at laying the foundation for comprehensive reforms that will sustain higher growth and reduce poverty.
“The main objective of the new programme is to strengthen the country’s external position, as a prerequisite for arrears clearance, resumption of debt service, and restored access to external financing,” said the IMF.
In addressing the country’s external debt situation, the successor SMP, according to IMF, would aim to accumulate international reserves and seek to mobilise international support. The fund also stated that authorities should strive to consolidate the fiscal position by eliminating the primary budget deficit by the end of next year.
IMF has dedicated itself to helping Zimbabwean authorities enhance the business climate, boost productivity and competitiveness, and build confidence as successful implementation of policies can help in justifying a fund financed programme.
“The authorities intend to restore confidence in the financial sector, as well as improve public debt and financial management. Finally, the authorities plan to make progress in a number of key structural reform areas in order to enhance the business climate, boost productivity and competitiveness, and build confidence.
Successful implementation of these reforms will demonstrate that the country can implement the policies that could justify a Fund-financed programme,” said the IMF.
Global commodity price shocks, domestic policy slippages and gaps in policy implementation capacity have been identified as key risks to the new programme.
A successful implementation of the SMP would be an important stepping stone towards Zimbabwe’s normalising relations with the international community.
An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic programme.
SMPs do not entail financial assistance or endorsement by the IMF Executive Board.
Gross Domestic Product growth in the country decelerated from 10,5 percent in 2012 to 4,5 percent in 2013 due to adverse weather conditions, weak demand for key exports, and election-year uncertainty.
The outlook in 2014 is for continued low growth of three percent.
Annual inflation dipped below zero recently, but stood at 0,1 percent in September 2014.
