IMF to consider Zimbabwe progress report

ZIMBABWE expects to take its re-engagement with multilateral institutions to the next stage as the International Monetary Fund board considers a report on the progress the country has made in terms of policy reform and improving the economic environment.

The IMF board was due to consider its mission report on the Staff Monitored Programme and Article IV consultations yesterday.

If the fund's mission report is adopted it paves way for the Government to work on a financing strategy for the country.

The successful resolution of Zimbabwe's external payment arrears will be an important step toward normalising relations with the international financial community and will allow the country to eventually seek a fund financial arrangement.

"It will also send strong signals to the international community, reduce the perceived country risk premium, and unlock affordable financing for government and the private sector. This, together with policy reform, will help to achieve sustained economic development through economic transformation, to improve living conditions for the people of Zimbabwe, and to reduce poverty," the fund said.

Government expects to complete drafting a debt clearance strategy by September.

Finance and Economic Development Minister Patrick Chinamasa expects the IMF board to ratify its mission report.

"We cannot envisage a situation where the board will query the mission with respect to their report so we are quite optimistic that the report will be received well by the board," Minister Chinamasa said last week.

He said after the IMF board adoption of the fund's mission report Zimbabwe will begin the process of putting the elements together towards arrears clearance.

This is expected to be completed around September-October this year.

The mission preliminary report noted that Zimbabwe has met all quantitative targets and structural benchmarks under the third and final review of the SMP.

It noted that Government has started to develop a medium term economic transformation programme, in line with the broader reform agenda presented at the Lima meetings on arrears clearance in October 2015.

The fund suggested that the medium term economic transformation programme should include fiscal discipline which is the key priority.

"Given the lack of resources, the authorities need to keep the cash primary accounts close to balance. This heightens the urgency of re-engagement with the international community. The objective is to unlock financing that could allow Zimbabwe to deal with adverse shocks and plan for much needed social and capital outlays. This will, however not be sufficient. We support the authorities' ambitious plan for shifting resources to much needed infrastructure investment and social outlays by reigning in employment costs," the mission report said.

In the financial sector, significant progress has been made but risks remain, the fund noted saying it will be important to continue with strong proactive supervision, further reduce non-performing loans, and deliver on financial inclusion as outlined in the National Financial Inclusion Strategy to reinforce confidence and cement financial stability.

Improving the business environment is key. In particular, the consistent and transparent implementation of the indigenisation policy will be critical to attract both foreign and domestic investment by limiting the scope for discretion.

"This will go a long way to unleash Zimbabwe's growth potential. The bankable land leases which the authorities are finalising will help to boost productivity and access to financing in agriculture," the fund said.