BY MISHMA CHAKANYUKA
International Monetary Fund (IMF) staff and Zimbabwe have agreed on steps that will pave way for a Staff Monitored Programme (SMP).
An SMP involves the IMF staff monitoring a country’s economic targets and policies. Zimbabwe has had several successful SMPs between 2013 and 2015.
The successful completion of an SMP is seen as a critical step before the country can proceed to re-engage international financial institutions.
In a statement, Gene Leon, who had led a mission to Harare, said IMF staff and the Zimbabwean authorities have reached agreement on macroeconomic policies and structural reforms that can underpin a Staff Monitored Programme.
“Zimbabwe is facing deep macroeconomic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hamper the functioning of the economy,” he said.
“In addition, Zimbabwe is facing the challenge of responding to the adverse effects on agriculture and food security of the El Niño-related drought, as well as the devastation from Cyclone Idai”.
Leon added that the SMP will be monitored on a quarterly basis and it aims to implement a coherent set of policies to facilitate a return to macro-economic stability.
“The policy agenda to be monitored under the SMP is anchored on the authorities’ Transitional Stabilisation Programme and emphasises fiscal consolidation, the elimination of central bank financing of the fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets,” he said.
“In addition, the agreed policies — both macro-economic and structural — can be expected to remove critical distortions that have held back private sector growth and to improve governance. The SMP also includes important safeguards to protect the country’s most vulnerable people”.
In its latest outlook, the IMF forecasts Zimbabwe’s economy to contract by 5,2% from an earlier growth projection of 4,2%.