HARARE, March 9 (The Source) – Zimbabwe has met all targets under its Staff Monitored Program (SMP) but economic growth is likely to weaken further in 2015, the International Monetary Fund said on Monday.
Fellow Bretton Woods institution World Bank expects the country’s economy to grow by 3,2 percent this year and the IMF said economic prospects remained difficult with growth slowing down and expected to weaken further in the year after poor rains and weak commodity prices.
“Despite the favorable impact of lower oil prices, the external position remains precarious, and the country is in debt distress,” said the IMF in a statement at the conclusion of the first review of the latest SMP.
An SMP is an informal agreement between a government and IMF staff to monitor the implementation of a particular country’s economic reforms. It does not entail resumption of funding from the multilateral finance institution but Domenico Fanizza, the head of the IMF mission which was in Harare to review the SMP progress on Monday said Zimbabwe had developed a roadmap to seek debt rescheduling by the Paris Club, an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries.
“The authorities are committed to intensifying their efforts to lay the ground for stronger, more inclusive and lasting economic growth,” said the IMF.
“Their resolve to reengage with the international financial community and to seek its support for the reform process is encouraging.”
It noted that Zimbabwe has stepped up repayments to the World Bank, a development seen clearing the path to debt rescheduling despite substantial economic difficulties.
Harare’s external debt, at $10 billion, continues to block access to fresh funding and government feels its resolution would bring the economy on the growth path.
It owes IMF and the World Bank $124 million and $1 billion.
“The authorities have made progress in implementing their reform programme, despite substantial economic and financial difficulties. All quantitative targets and structural benchmarks for the first review were met,” said the IMF.
“Moreover they have stepped up reengagement with creditors by raising payments to the World Bank and by developing a roadmap to seek debt rescheduling under the umbrella of the Paris Club. These developments constitute important steps towards reengaging with the international financial institutions.”
The IMF mission also welcomed actions to restore confidence in the country’s financial sector and noted progress to clarify indigenisation laws, which were modified in January.
Last month, Zimbabwe was taken off the list of countries subjected to monitoring by the Financial Action Task Force (FAFT) after improving its money laundering regime.
“Our intention is that by this time next year we should be entering the new phase of clearing our arrears and opening the floodgates of new development financing, FDI and other financial flows that will reduce poverty in our country,” said finance minister, Patrick Chinamasa.
The next assessment is in September.
Under the current SMP, the third since 2013, the policy reform agenda focuses on balancing the primary fiscal accounts, improving the investment climate, restoring confidence in Zimbabwe’s financial sector and garnering support for a strategy to clear arrears with multilateral institutions.