IMF says Zim­babwe needs rad­i­cal re­forms

The Pak Banker - - COMPANIES/BOSS -

An In­ter­na­tional Mon­e­tary Fund (IMF) mis­sion led by Domenico Fanizza vis­ited Harare this week to hold dis­cus­sions on the 2016 Ar­ti­cle IV Con­sul­ta­tions and the third and fi­nal re­view un­der a 15-month Staff-Mon­i­tored Pro­gram (SMP) ap­proved by Man­age­ment in Oc­to­ber 2014. The dis­cus­sions cov­ered re­cent eco­nomic de­vel­op­ments and the near and medium-term out­look and risks for Zim­babwe; im­ple­men­ta­tion of the poli­cies and re­forms un­der the SMP; and near and medium-term poli­cies that could help re­move the hur­dles to growth.

At the con­clu­sion of the mis­sion, Mr. Fanizza said, "Eco­nomic dif­fi­cul­ties have deep­ened. Zim­babwe can­not wait and needs to act now. The El Niño-in­duced drought has hit the econ­omy hard. Lower com­mod­ity prices and the ap­pre­ci­a­tion of the U.S. dol­lar have com­pounded dif­fi­cul­ties. Pol­icy ac­tion is needed to re­verse this trend. Once the SMP is com­pleted suc­cess­fully-as an ini­tial step to­ward re­form and re-en­gage­ment with in­ter­na­tional part­ners-a com­pre­hen­sive and am­bi­tious eco­nomic trans­for­ma­tion pro­gram is needed to re­vive the Zim­bab­wean econ­omy and to ce­ment sup­port among in­ter­na­tional part­ners".

He said the au­thor­i­ties have met all quan­ti­ta­tive tar­gets and struc­tural bench­marks un­der the third and fi­nal re­view of the SMP. More­over, they have started to de­velop a medium term eco­nomic trans­for­ma­tion pro­gram, in line with the broader re­form agenda pre­sented at the Lima meet­ings on ar­rears clear­ance in Oc­to­ber 2015. We be­lieve the es­sen­tial com­po­nents of this pro­gram should be: Fis­cal dis­ci­pline 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.

In the fi­nan­cial sec­tor, sig­nif­i­cant progress has been made but risks re­main. It will be im­por­tant to con­tinue with strong proac­tive su­per­vi­sion, fur­ther re­duce non­per­form­ing 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 fi­nal­iz­ing will help to boost pro­duc­tiv­ity and ac­cess to fi­nanc­ing in agri­cul­ture.

He said, "We are en­cour­aged that the au­thor­i­ties plan to clear the out­stand­ing ar­rears with In­ter­na­tional Fi­nan­cial In­sti­tu­tions (IFIs), as out­lined at the Lima meet­ings. The suc­cess­ful res­o­lu­tion of Zim­babwe's ex­ter­nal pay­ment ar­rears will be an im­por­tant step to­ward nor­mal­iz­ing 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 mis­sion met with P. A. Chinamasa, Min­is­ter of Fi­nance and Eco­nomic De­vel­op­ment, D. Mombeshora, Min­is­ter of Lands and Ru­ral Re­set­tle­ment, P. Mup­fu­mira, Min­is­ter of Pub­lic Ser­vice, La­bor and So­cial Wel­fare, M. J. M. Sibanda, Chief Sec­re­tary to the Pres­i­dent and the Cab­i­net, J. P. Man­gudya, Gov­er­nor of the Re­serve Bank of Zim­babwe (RBZ), other se­nior of­fi­cials, mem­bers of the par­lia­ment, and rep­re­sen­ta­tives of the pri­vate sec­tor, civil so­ci­ety and de­vel­op­ment part­ners. The team wishes to thank the au­thor­i­ties for their warm hos­pi­tal­ity and ex­cel­lent col­lab­o­ra­tion.

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