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Unpacking the imf debt relief. debunking the narrative that Zimbabwe was snubbed

22 Apr 2020 at 09:04hrs | Views
The International Monetary Fund (IMF) Executive Board has approved immediate debt relief for 25 Countries. This was announced in a statement that was issued on the 13th of April by Ms Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF). This relief was approved under the IMF's revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund's response to help address the impact of the COVID-19 pandemic.

This gave grants to vulnerable  and poorest members who are struggling to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts.

This is only a relief and it allows a breathing period to those who owe and that instead of channelling money to the debt they will use it for urgent and life threatening issues.

Contrary to the news circulated around and originated by Tendai Biti of the MDC A if it is still there that Zimbabwe was not granted the relief because of its human rights history. In actual fact Zimbabwe has paid off its debt so as a country we do not owe IMF so we do not need a relief from a debt we do not have.
The position taken by the IMF shows that facts are stubborn and they can not be twisted by propaganda.
All along the world has penned Zimbabwe as one of the most poorest countries in the world. Zimbabwe is actually not in the poor club. We are not considered as the poor that's the main reason why we could not qualify for the relief.  

Bit I'd wishful thinking that Zimbabwe is being punished by the debt relief Snub is embarrassing and cheap politics by an overzealous man whose political career is facing uncertainty. The idea of always denigrating your country is very shameful and MDC and the detractors must at least grow up.

As a country we have our own challenges but IMF has shown the world that we are not as what we are labelled by those who wish us bad.

It must be realised that  when a country borrows from the IMF, its government agrees to adjust its economic policies to overcome the problems that led it to seek financial aid. These policy adjustments are conditions for IMF loans and serve to ensure that the country will be able to repay the IMF. This system of conditionality is designed to promote national ownership of strong and effective policies.

The policies the IMF impose on a country are meant to keep the country in a perpetual debt. The conditions forces a country to follow the design of IMF-supported programs—that is, macroeconomic and structural policies—and the specific tools used to monitor progress toward goals outlined by the country in cooperation with the IMF.  This simply puts your country in the hands of the IMF. It plunged the nation into measures that are harmful to national or international prosperity. These are the measures which are meant to safeguard IMF resources by ensuring that the country's financial stability is under the grip of the IFM. The country will never have a balance of payments which is strong enough to permit it to repay the loan.

The member country has primary responsibility for implementing policies to make the IMF-supported program successful. The program is described in a letter of intent, which often has a memorandum of economic and financial policies attached. The program's objectives and policies depend on a country's circumstances. But the overarching goal is always to restore or maintain balance-of-payments viability and macroeconomic stability while setting the stage for sustained, high-quality growth and, in low-income countries, encouraging poverty.    

While the IMF assists countries hit by crises by providing them financial support to create breathing room as they implement adjustment policies to restore economic stability and growth the conditions are always counterproductive. It is also supposed to provide precautionary financing to help prevent and insure against crises. The IMF's lending toolkit is continuously refined to meet countries' changing needs and it is the IMF which creates such a need.  The causes of crises are varied and complex, and can be domestic, external, or both.

Domestic factors include inappropriate fiscal and monetary policies, which can lead to large economic imbalances (such as large current account and fiscal deficits and high levels of external and public debt);
Political instability and/or weak institutions can also trigger crises by exacerbating economic vulnerabilities.

External factors include shocks ranging from natural disasters to large swings in commodity prices. These are common causes of crises especially for low-income countries, which have limited capacity to prepare for such shocks and are dependent on a narrow range of export products. Crises generally result in sharp slowdown in growth, higher unemployment, lower incomes and greater uncertainty which cause a deep recession. In acute crisis cases, defaults or restructuring of sovereign debt may become unavoidable.

IMF lending aims to give countries breathing room to implement adjustment policies in an orderly manner, which will restore conditions for a stable economy and sustainable growth. These policies will vary depending upon the country's circumstances. Zimbabwe despite its economic challenges does not owe IMF we actually paid the debt.

A country facing a sudden drop in the prices of key exports may need financial assistance while implementing measures to strengthen the economy and widen its export base. A country suffering from severe capital outflows may need to address the problems that led to the loss of investor confidence—perhaps interest rates are too low; the budget deficit and debt stock are growing too fast; or the banking system is inefficient or poorly regulated.

In the absence of IMF financing, the adjustment process for the country could be more abrupt and difficult. For example, if investors are unwilling to provide new financing, the country would have no choice but to adjust—often through a painful compression of government spending, imports and economic activity. IMF financing facilitates a more gradual and carefully considered adjustment. As IMF lending is usually accompanied by a set of corrective policy actions, it also provides a seal of approval that appropriate policies are taking place.

The IMF's various lending instruments are tailored to different types of balance of payments need as well as the specific circumstances of its diverse membership
All IMF members are eligible to access the Fund's resources in the General Resources Account (GRA) on non-concessional terms, but the IMF also provides concessional financial support (currently at zero interest rates through June 2021) through the Poverty Reduction and Growth Trust (PRGT)which is better tailored to the diversity and needs of low-income countries. This financial support has not been denied Zimbabwe. We never asked for it. Why would a whole former minister of finance pray for his country to be in debt. Biti is an embarrassment to the nation and indeed he has no interest of the country at heart.

While Zimbabwe is labelled as a failed state by its detractors especially by the MDC leaders the events have shown that there has been a lot of work towards the well-being of the nation.

Mthuli has become one infamous minister but he deserve a rare pat at the back for a job welcome.
The spirit of do what others are doing is seen in the excitement Biti exhibited as he lied that Zimbabwe missed out in the debt relief.  What exactly was he celebrating about. Zimbabwe did not miss out it simply proved that the impossible will be possible.

If we work together as a nation we will do more. We need to support our own programs. We might have debts here and there but as a nation we do not owe IMF.

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Source - Dr Masimba Mavaza
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