The International Monetary Fund (IMF) has said Zimbabwe needs to address the forex shortages and live within its means, as a solution to the prevailing economic woes.
BY BUSINESS REPORTER
In a recent Press briefing, IMF deputy spokesperson William Murray said the global lender was assisting Zimbabwe with policy advice and capacity development.
Murray had been asked on what the institution was doing in assisting Zimbabwe find lasting solutions to the economic crisis.
“The financial sector is of particular focus at the moment, and its current difficulties in securing access to dollars have deeper, underlying causes that need to be addressed, including through financial consolidation, so that the government does not persistently spend more money than it is [getting]. And also on structural reforms to improve Zimbabwe’s competitiveness and to facilitate badly needed capital inflows,” Murray said.
Zimbabwe has been accused of living beyond its means. In 2016, Treasury incurred a budget deficit of $1,4 billion which was financed by borrowing from the domestic market, thereby crowding out the private sector.
He said IMF was encouraging Zimbabwe to press ahead with economic adjustment and reforms in a timely manner, so that the country can realise its potential.
Zimbabwe is battling a foreign currency crisis with companies struggling to make foreign payments due to the depleting nostros. The central bank attributes the crisis to increased demand by companies as they import raw materials to increase production.
The Reserve Bank of Zimbabwe has moved to plug the forex shortages by securing a $600 million nostro stabilisation facility from Afreximbank.
Analysts say the foreign currency shortages were worsened by the low confidence attributed to the introduction of bond notes in November last year under the $200 million export incentive facility guaranteed by Afreximbank. The bond note is at par with the US dollar with the parallel market devaluing the surrogate currency by 30%.
Zimbabwe cannot borrow from multilateral institutions as it has failed to clear outstanding debts. Last year, Zimbabwe settled its overdue obligations to the IMF amounting to $107,9 million.
The clearance of the overdue obligations does not mean the opening of lines of credit which will available after Zimbabwe has cleared arrears to other multilateral creditors under the pari-passu rule (African Development Bank, the World Bank, European Investment Bank) as well as bilateral official creditors.
Zimbabwe owes the African Development Bank ($642 million), World Bank ($1,4 billion) and
$294 million to the European Investment Bank.