IMF sanc­tions re­moval sets tone for eco­nomic re­vival

Chronicle (Zimbabwe) - - National News -

ZIM­BABWE is slowly nor­mal­is­ing its re­la­tions with global mul­ti­lat­eral in­sti­tu­tions as it in­ten­si­fies ef­forts to ex­tri­cate the econ­omy from years of un­der­per­for­mance wrought by sanc­tions. It has em­barked on a re­form and re-en­gage­ment process that has seen it reach out to global lenders such as the World Bank, In­ter­na­tional Mon­e­tary Fund and African Devel­op­ment Bank.

Granted, the coun­try owes a lot of money to these in­sti­tu­tions but it has made sig­nif­i­cant head­way in con­vinc­ing them that it is on track to meet­ing some of their pre­scrip­tions. Fi­nance and Eco­nomic Devel­op­ment Min­is­ter Pa­trick Chi­na­masa and his team at Trea­sury have been qui­etly plug­ging away at the stub­born tech­nocrats at the Bret­ton Woods in­sti­tu­tions and their ef­forts have been re­warded with the IMF an­nounc­ing this week that it has re­moved its sanc­tions on Zim­babwe, a month after the coun­try cleared its $107 mil­lion ar­rears to the multi-lat­eral lend­ing in­sti­tu­tion.

The land­mark move was im­me­di­ately wel­comed by Govern­ment which said the lift­ing of the re­me­dial mea­sures meant the coun­try was now el­i­gi­ble for any fa­cil­ity that is given to share­holder mem­ber coun­tries. The IMF ex­ec­u­tive board on Mon­day rat­i­fied the re­moval of the re­me­dial mea­sures ap­plied to Zim­babwe which had been in place as a re­sult of the coun­try’s over­due fi­nan­cial obli­ga­tions to the Poverty Re­duc­tion and Growth Trust (PRGT).

The mea­sures to be re­moved in­clude the dec­la­ra­tion of non-co­op­er­a­tion with the IMF, the sus­pen­sion of tech­ni­cal as­sis­tance and the re­moval of Zim­babwe from the list of PRGTel­i­gi­ble coun­tries. This is a ma­jor break­through for Zim­babwe which will en­hance the coun­try’s credit rat­ing while open­ing new lines of cheap fi­nance badly needed to kick­start key sec­tors of the econ­omy. We com­mend the IMF for be­ing sin­cere in its en­gage­ment with Zim­babwe and hon­est enough to ac­knowl­edge the tremen­dous work that has gone into the debt clear­ance process.

In this vein, we urge the World Bank and AfDB to con­tinue co­op­er­at­ing with Zim­babwe as it works to­wards liq­ui­dat­ing its debts to them. Speak­ing after the IMF lifted sanc­tions on Mon­day, Min­is­ter Chi­na­masa said the move meant Zim­babwe and the IMF had re­stored their re­la­tions. “Be­cause of the fact that we were in ar­rears, we were not el­i­gi­ble to ac­cess any fa­cil­i­ties, which we are en­ti­tled to as a share­holder mem­ber,” he said.

“Zim­babwe is a share­holder of the IMF and as a share­holder, we are en­ti­tled to cer­tain fa­cil­i­ties which nor­mally come at good rates of in­ter­est. The rules are that if a coun­try falls into ar­rears, you can­not ac­cess those fa­cil­i­ties, they then put a dec­la­ra­tion of non-co­op­er­a­tion.”

This is good news for Zim­babwe as it is now el­i­gi­ble for any fa­cil­i­ties which are given to share­holder mem­ber coun­tries and can also now ap­ply for cer­tain fa­cil­i­ties with the ap­pli­ca­tion be­ing con­sid­ered on its merit.

Whereas, when there was the dec­la­ra­tion of non-co­op­er­a­tion, the coun­try was not even el­i­gi­ble to ap­ply, the lift­ing of the dec­la­ra­tion of non-co­op­er­a­tion sends a very good sig­nal that Zim­babwe has mended re­la­tions with the IMF.

The IMF state­ment con­firm­ing the re­moval of its “re­me­dial mea­sures”, read: “The ex­ec­u­tive board of the IMF ap­proved to­day (Mon­day) the re­moval of the re­me­dial mea­sures ap­plied to Zim­babwe that had been in place be­cause of the mem­ber’s over­due fi­nan­cial obli­ga­tions to the Poverty Re­duc­tion and Growth Trust (PRGT), ef­fec­tive Novem­ber 14, 2016. ‘These mea­sures are: (i) dec­la­ra­tion of non-co­op­er­a­tion with the IMF (ii) the sus­pen­sion of tech­ni­cal as­sis­tance (which had al­ready been par­tially lifted), and (iii) the re­moval of Zim­babwe from the list of PRGTel­i­gi­ble coun­tries. ‘This fol­lows Zim­babwe’s full set­tle­ment of all of its over­due fi­nan­cial obli­ga­tions to the PRGT of SDR 78.3 mil­lion (about $107.9 mil­lion) on Oc­to­ber 20, 2016. Zim­babwe had been in con­tin­u­ous ar­rears to the PRGT since Fe­bru­ary 2001 and was the only case of pro­tracted ar­rears to the PRGT. Zim­babwe is now cur­rent on all of its fi­nan­cial obli­ga­tions to the IMF.”

Fol­low­ing the liq­ui­da­tion of the IMF debt, Zim­babwe is now angling to re­solve its ar­rears to the AfDB and the World Bank both owed a com­bined sum of $1.7 bil­lion. The coun­try scored a ma­jor break­through last year when the mul­ti­lat­eral in­sti­tu­tions agreed to its debt clear­ance plan.

Mon­e­tary au­thor­i­ties have in­di­cated that sig­nif­i­cant progress has been made to­wards the re-en­gage­ment process to clear the coun­try’s ex­ter­nal debt ar­rears with mul­ti­lat­eral fi­nan­cial in­sti­tu­tions.

This is cru­cial be­cause ex­ter­nal debt ar­rears clear­ance will im­prove Zim­babwe’s coun­try risk pre­mium through re­duc­ing its debt over­hang. This will also en­hance the coun­try’s ac­cess to for­eign fi­nance. The lift­ing of sanc­tions by the IMF has come at an op­por­tune time for the coun­try as it will en­hance its eco­nomic re­vival ef­forts.

The over­all image of the coun­try as a pariah state will also fall away. The read­mis­sion of Zim­babwe into the com­mu­nity of na­tions is long over­due and we hope other bod­ies and na­tions that have im­posed sanc­tions on the coun­try have been put on no­tice.

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