Zimbabwe on track to meet targets as IMF team arrives for second SMP review – official

Zimbabwe on track to meet targets as IMF team arrives for second SMP review – official

HARARE, August 26 (The Source) – The International Monetary Fund (IMF) says Zimbabwe remains on track to meet its targets under the Staff Monitored Programme but warned that economic prospects for the country remained difficult.

An IMF mission is expected in the country next week from August 31 to September 11 to conduct the second review under the 15-month SMP, an informal agreement between a government and IMF staff to monitor the implementation of its economic reforms, the IMF’s resident representative Christian Beddies said on Wednesday.

The programme, which runs from October 2014 to December 2015, does not entail resumption of funding but could lead to a 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.

“Zimbabwe met all the targets set for the first review and these were done under difficult economic conditions and preliminary conditions are that the SMP remains on track, but of course the mission will have to make that assessment and discuss with the authorities, policies going forward,” Beddies said at a press conference.

The mission will also assess the macro-economic conditions in Zimbabwe and review its growth projections for the year 2015, which it estimated at 2,8 percent after the first review in April, and beyond.

Government has revised the growth rate to 1,5 percent but Beddies said there are risks to that projection, which will depend on developments during the remainder of the year.

“The situation remains challenging and difficult, the agricultural season has not been good. The government has been expecting it to be better but isn’t,” he said.

Developments in mining, output from the winter agriculture season and how the government addresses the tight liquidity situation in the country and access to credit are some of the risks, he added.

“These are reforms that the government is trying to tackle but will obviously take some time.  Manufacturing, to some degree, depends on the exchange rate vis-a-vis the rand which has been depreciating against the US dollar and that complicates things a little bit. So these are all factors that constitute the risks to that outlook,” said Beddies.

South Africa is Zimbabwe’s leading trading partner and its weakening currency gives its products a pricing edge over locally produced goods.

The World Bank has said the economy will post a one percent growth but economic analysts are less optimistic, with some predicting Zimbabwe could slip into recession later this year.

The one bright spot, Beddies said, has been the 29 percent increase in gold output to 6.8 tonnes thanks to higher deliveries by small-scale mines.

Finance Minister Patrick Chinamasa said in the half-year budget statement that despite weak global metal prices, mining was expected to grow by 3.5 percent this year, boosted by higher nickel, gold and coal output.

Beddies also said Zimbabwe Government is making token payments of $150,000 to the IMF per month, with the debt at $111 million.  Similar payments were also being made to the World Bank and the African Development Bank, he added.

“The external position remains very precarious with a large current account deficit and that is why it is important to increase payment capacity and improve the situation and this is part of what we want to achieve together with government in this SMP,” said Beddies.

Of the $500 million allocated to Zimbabwe in IMF special drawing rights in 2009, the country is keeping $152 million as reserves although it could access the funds, he said.

A committee on to come up with options to clear the external arrears chaired by the central bank governor and comprising seniors officials from  the finance ministry, IMF, World Bank and AfDB remains a work in progress, he added.