(Last Updated on November 9, 2014 by Editor)
HARARE – The Zimbabwe economy requires comprehensive reforms to sustain higher growth rates and poverty reduction, the International Monetary Fund (IMF) said on Friday.
“Zimbabwe’s economy is at a crossroads. The economic situation remains difficult,” IMF said.
IMF said Zimbabwe’s external position was precarious, with low international reserves, a large current account deficit, an overvalued real exchange rate and growing external arrears.
The warning comes as the ruling Zanu PF government has relegated economic issues to the periphery as politicians jostle for positions ahead of next month’s elective congress.
It also comes as IMF approved a successor to its supervised economic reform plan on Zimbabwe. The plan, Staff Monitored Programme (SMP) runs up to December 2015.
IMF said the successor SMP was aimed at laying the foundations for comprehensive reforms.
“The main objective of the new programme is to strengthen the country’s external position, as a prerequisite for arrears clearance, resumption of debt service, and restored access to external financing,” IMF said.
Zimbabwe has an external debt of over US$9 billion which has militated against the inflow of lines of credit from multilateral financial institutions.
IMF said Zimbabwe “will strive to consolidate the fiscal position, eliminating the primary budget deficit by end-2015”.
It said Zimbabwe “will also aim to accumulate international reserves and seek to mobilise international support for resolving the country’s external debt situation”.
Zimbabwe also promised to restore confidence in the financial sector, as well as improve public debt and financial management. IMF said Zimbabwe plans to make progress in a number of key structural reform areas in order to enhance the business climate, boost productivity and competitiveness, and build confidence.
“Successful implementation of these reforms will demonstrate that the country can implement the policies that could justify a Fund-financed programme,” IMF said.
Zimbabwe has in the past five years made moves to lure IMF widely considered as the international financial “commissioner of oaths”.
The renegotiations culminated in IMF agreeing to a Staff Monitored Programme on Zimbabwe last year. IMF recently reopened its Harare office that had been closed in 2004.