The international Monetary Fund has said Zimbabwe’s economic prospects remain difficult as growth has stalled and is now expected to weaken further this year on debt distress, fiscal challenges and difficulties in policy implementation.
This follows its first review under the Staff-Monitored Programme, an informal agreement between country authorities and Fund staff to monitor the implementation of economic programmes which concluded on April 8. The programme does not entail financial assistance.
One of the key benchmarks of the SMP, reducing government spending on its wage bill, has come under increased scrutiny following President Robert Mugabe’s public rebuke of Finance Minister Patrick Chinamasa after his proposal, last week, to freeze civil service bonuses until 2017. Addressing an independence day rally in Harare on Saturday, Mugabe reversed the finance minister’s bonus policy, throwing serious doubt over government’s ability to implement financial reforms.
“Zimbabwe’s economic prospects remain difficult. Growth has slowed and is expected 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,” said IMF in a statement released on Tuesday.
Key risks to the outlook stem largely from a further decline in global commodity prices, fiscal challenges, and possible difficulties in policy implementation, it added.
IMF however commented Zimbabwe for committing to intensifying efforts to ensure successful implementation of the programme and to lay the ground for stronger, more inclusive and lasting economic growth.
“Despite economic and financial difficulties, the Zimbabwean authorities have made progress in implementing their macroeconomic and structural reform programs, particularly regarding clarifying the indigenization policy, restoring confidence and improving financial sector soundness, and strengthening public financial management,” the IMF said.
“During 2015, the authorities’ policy reform agenda will continue to focus on: (a) reducing the primary fiscal deficit to raise Zimbabwe’s capacity to repay; (b) restoring confidence in the financial system; (c) improving the business climate; and (d) garnering support for an arrears clearance strategy.”
It added that strong performance under the SMP would improve Zimbabwe’s repayment capacity and demonstrate that it can implement reforms that could justify a Fund-financial arrangement, which could help tackle the country’s deep-rooted problems.
“The authorities have stepped up their reengagement with creditors, including by increasing payments to the World Bank and the African Development Bank. These re-engagement steps open the way for further constructive dialogue to identify feasible options for clearing the arrears to these institutions—a key step towards seeking rescheduling of bilateral official debt under the umbrella of the Paris Club.”
The institution said its staff will continue to support Zimbabwe’s economic reforms and the pursuit towards a debt relief strategy.
In October last year IMF approved a 15-month SMP which is seen as a lynchpin of the authorities’ roadmap for building a strong track record towards normalising the relationship with Zimbabwe’s creditors and mobilizing development partners’ support. -The Source