HARARE - The International Monetary Fund (IMF) has extended Zimbabwe’s Staff Monitored Programme (SMP) by six months following Finance minister Patrick Chinamasa’s request when he visited Washington last October.
The global lender said the extension was necessary “to allow time for the national authorities to strengthen their policies and deliver on outstanding commitments under the programme”.
Zimbabwe — whose economy is emerging from a decade-long recession — began the IMF-led programme in June last year.
If successful, it could help the southern African nation clear its $6,1 billion debt and open up access to new international credit.
SMP is an agreement to monitor the government’s economic programme but that does not involve financial assistance.
Market watchers believe the move by the Bretton Woods Institution marks a major step towards Zimbabwe normalising relations with the IMF, which suspended its voting rights in 2003 over policy differences with President Robert Mugabe and non-payment of arrears.
While its voting rights were restored in 2010, Zimbabwe has not been able to borrow from international financiers since 1999 when it started defaulting on its debt.
According to Treasury, the country’s external debt stands at $6,1 billion.
In his 2014 National Budget, Chinamasa noted that the new economic blue print, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), recognises the importance of re-engagement with the country’s creditors for debt relief, including new financing.
“With respect to the debt overhang, we remain committed to engaging the Bretton Woods institutions and will to the best of our ability abide by the Staff Monitored Programme,” he said.
Chinamasa added that government has been re-engaging with the IMF, World Bank and the African Development Bank on the resolution for debt relief.
“I must hasten to repeat what I conveyed to the Bretton Woods Institutions, ‘the Staff Monitored Programme is keeping the Zimbabwean economy in a standstill position’.
“This is not in the interest of both the creditor and our economy. Our economy needs an injection of new money,” he said.
“I, therefore, call upon all our creditors to seriously consider granting us debt relief and, at the same time, providing us with new funding so that we broaden our revenue base, thereby enhancing our capacity to honour our obligations,” noted Chinamasa.
Under the programme, initially set to run until December 2013, Zimbabwe is expected to enact a series of economic reforms.
The IMF-led SMP focuses on fiscal consolidation and strengthening public financial management, including protecting investment in infrastructure and priority social spending, and completing the structural reforms in the areas of tax policy and administration, and increasing transparency in collection of revenues from activities of the mining of diamonds.
The programme also seeks the enhancement of the financial sector stability and reducing vulnerabilities and completing the reforms at the Reserve Bank of Zimbabwe, especially the restructuring of its balance sheet and strengthening the banking sector regulatory and supervisory framework.
A successful implementation of the SMP is a pre-condition for negotiating arrears clearance and debt relief and will also assist in reducing the country’s credit risk rating and in the process attract foreign direct investment.