IMF: Staff program to ‘anchor’ Zim reform plan, but debt clearance still first hurdle

The International Monetary Fund (IMF) says its recently approved Staff Monitored Programme (SMP) for Zimbabwe is meant to “anchor” the country’s reform plan, but reiterated that the country still has to clear its arrears with lenders if it’s to open doors for the fresh credit it deeply covets.

The IMF in May approved an SMP for Zimbabwe, the first such engagement in years, and Finance Minister Mthuli Ncube said last week he hoped the completion of the programme next January would make Zimbabwe eligible for credit. The IMF, as before, says this must be preceded by Zimbabwe clearing its arrears.

“The answer on Zimbabwe is that the Fund cannot provide financial assistance to Zimbabwe before three conditions essentially have been met.  And they include clearing existing arrears to international financial institutions.  Arrears have been cleared with the IMF but not with other institutions,” IMF spokesperson Camilla Andersen said at an IMF briefing Thursday.

“And second, obtaining financing assurances from official bilateral creditors. And third, reaching agreement on a coherent set of macroeconomic policies that can restore economic growth, lay the foundation for job creation.  So those are the three conditions for the IMF to be able to lend to Zimbabwe.”

Andersen said the SMP was meant to back Zimbabwe’s economic reform plan, which should see the country liberate its exchange rate.

“So, the staff monitored program is supporting the reform agenda, you know, it seeks to help them with the large fiscal adjustment they need.  You know, eliminating central bank financing of the fiscal deficit and also adopting reforms to allow for the effective functioning of market based foreign exchange and debt markets.”

Last week, Ncube said once the SMP is completed, Zimbabwe plans to access bridge financing to clear about US$1.2 billion of arrears to the World Bank, African Development Bank and the European Investment Bank.

On whether Zimbabwe would then approach the IMF for funding, Ncube said: “Why not? We can only ask, they can only say no. But if we can get funding from the IMF that would be fantastic. Just additional support on our balance-of-payments position.”

Zimbabwe has cleared all its IMF debt, but it is required to clear its arrears with other main lenders to get any new funding from them.

“The first order of business is to clear the arrears and then move onto phase two, which is the bilateral discussions with the Paris Club,” Ncube said. “If it works well in the first phase, it’s the same Paris partners who control those two big institutions that I was talking about, the same people. So if they accept supporting us on the same program with the European Investment Bank, surely they will support us on the bilateral phase as well.”

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