Zimbabwe has met all the quantitative targets under the supervised economic reform programme, the International Monetary Fund (IMF) has said, but warned that growth would weaken further this year.
BY OUR STAFF
Last year the IMF agreed to a successor Staff-Monitored Programme (SMP) — an informal agreement between country authorities and the global lender designed to monitor the implementation of the authorities’ economic programme — to help the country out of the woods.
The SMP runs for 15 months. In a statement after the first review of the economic reform programme, IMF head of mission to Zimbabwe Domenico Fanizza said Zimbabwe had met the targets despite economic and financial constraints.
“Despite substantial economic and financial difficulties, the authorities have made progress in implementing their reform programme, meeting all quantitative targets and structural benchmarks for the first review under the SMP. 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,” Fanizza said.
“These developments constitute important steps toward reengaging with the international financial institutions.”
Fanizza said the mission welcomed the “actions to restore confidence in the financial sector, and the progress to clarify the indigenisation laws, which were modified in January”.
The SMP covers four areas: balancing primary fiscal accounts, restoring confidence in the financial sector, improving investment climate and mobilising support for arrears clearance.
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IMF said the commitment to eliminate the primary fiscal deficit “reaffirms Zimbabwe’s intention to further raise its capacity to repay”.
“The top priority is to move resources from a too high wage bill to much-needed capital and social spending. To this purpose the authorities intend to work towards reducing the share of revenues absorbed by the wage bill,” IMF said.
Over 70% of government’s revenue is gobbled by the wage bill. IMF said plans to amend the Public Finance Management and the Procurement Acts will seek to increase accountability, transparency and efficiency in the use of public resources.
It said the reform of the tax regime for the mining sector could go a long way in mobilising additional resources, and continuing to publish audited financial accounts of the mining companies will enhance transparency.
IMF said a sound operational framework for the Zimbabwe Asset Management Company (Zamco) was key in freeing the banking system from the burden of high nonperforming loans that limit the banks’ ability to extend credit to the private sector and keep the cost of credit high.
Zamco was launched last year to buy NPLs from the banking sector. To date it has bought bad assets worth $65 million.
IMF said Zimbabwe plans to publish on the website of the Zimbabwe Investment Authority a simplified summary of the Indigenisation and Economic Empowerment legislation for the benefit of potential investors. This comes amid differing interpretation of the law by policy makers.
IMF said Zimbabwe will step up efforts to build consensus among all development partners on ways to address the arrears.
However, IMF warned that economic prospects remain difficult for Zimbabwe.
“Growth has slowed, and we expect it to weaken further in 2015. Despite the favourable impact of lower oil prices, the external position remains precarious and the country is in debt distress,” it said.
