HARARE, February 2 (The Source) – The International Monetary Fund (IMF) says its relationship with Zimbabwe is evolving in a positive way but notes that a ‘concerted international effort’ will be required to revive and reintegrate the southern African country’s struggling economy
Last week, President Emmerson Mnangagwa and the IMF managing director Christine Lagarde met on the sidelines of the World Economic Forum in Davos, Switzerland, with the Bretton Woods body pledging support for reforms.
“Our relationship with Zimbabwe has been evolving in a very positive way and for some months now,” spokesperson William Murray said at a press briefing on Thursday night.
“We’ve normalized our relationship in terms of their arrears to the IMF, but they still have a significant debt overhang problem with other international financial institutions and other official creditors. So it’s an issue that has to be addressed.”
Zimbabwe, which has arrears of around $1.8 billion to the World Bank and the African Development Bank, has not been able to borrow from international lenders since 1999, when it started defaulting on its debt.
“There has to be an arrears clearance process and a clear strategy for clearing those arrears with other creditors and that also has to be factored in to their ability, their sustainability over time,” said Murray.
Finance minister, in the 2018 budget indicated that Zimbabwe will revive the Lima Plan, a debt clearance plan that agreed to between Harare and the IFIs in October, 2015 which had stalled under the Mugabe regime.
Mnangagwa, who took over as president after long time ruler Robert Mugabe reluctantly ceded power following a de facto coup by the military, faces Zimbabwean economy is under pressure to implement economic reforms and create jobs in an economy with 90 percent joblessness.
The IMF said an unsustainable fiscal deficit has led to severe liquidity shortages, created inflationary pressures, and threaten the viability of the financial sector and Zimbabwe’s exchange rate regime.
Restoring growth, it added, will require concerted efforts to tackle the fiscal deficit including through rationalizing and better targeting the expense of agricultural support programs.
“The IMF stands ready to support the authorities and their efforts to address these challenges. But as we noted, in addition to a strong coherent reform program, a concerted international effort will be required to revive and reintegrate the Zimbabwean economy,” said Murray.
“An IMF financial arrangement, for example, would only be possible after progress in resolving Zimbabwe’s arrears to the other IFIs and to the other creditors.”