Zimbabwe does not qualify for debt relief under the heavily indebted poor countries (HIPC) initiative because it is not poor enough, but the International Monetary Fund is looking at a new flexible debt repayment schedule for the southern African nation, new country representative Dominique Fanezzi said today.
Zimbabwe is saddled with an external debt of nearly $10 billion and owes the IMF $142 million in arrears accrued since 2000, and as such cannot benefit from monetary support from the fund, Fanezzi told delegates attending a breakfast meeting on Zimbabwe-IMF relations which was hosted by The Herald newspaper.
He said Zimbabwe is not eligible for debt relief through the Highly Indebted Poor Countries model, which has helped countries such as Zambia settle their debts.
“Some requirements for the Highly Indebted Poor Countries are that a country has to be very, very poor and you need to have a very high debt. Zimbabwe does not qualify for that,” said Fanezzi, who was seconded to the country by the Fund in July after an absence of more than a decade.
“So that’s good on one side because you are not so poor. I think we should take our knowledge of the facts and move on with seeking what we call traditional rescheduling under the Paris Club.”
Zimbabwe in June last year undertook an IMF staff monitored programme (SMP), an informal and flexible instrument for dialogue between the Fund staff and a member country on its economic policies but does not entail financial support.
The government in January sought a six month extension of the SMP after missing targets and Fanezzi said the two parties were negotiating a second staff monitored programme.
“The mission is here to make a final review of the programme and bring the collaboration possibly to a different level through a new more ambitious programme,” he said.
“That programme could constitute an important step in the road to normalising relations with international financial institutions, a condition which is essential for seeking bilateral debt rescheduling under the Paris Club umbrella.”
He said the new staff monitored programme seeks to increase Zimbabwe’s capacity to repay by strengthening its external position and to demonstrate that the country can implement policies that could eventually justify a financial programme with the IMF.
“Zimbabwe needs to do other things. In particular, it needs to mobilise support from development partners to help the international partners to define a strategy to clear those outstanding arrears. This is by no means a very easy proposition. We should not think that this can be done easily but I think it’s worthwhile trying to do,” Fanezzi said.
“In order to succeed, this strategy requires concerted efforts on the domestic front in a sense what we are doing here is to build wide consensus on Zimbabwe’s economic reform programme, the policy that you are implementing. But also stronger efforts on the external front, to change perceptions that are unfortunately negative.”
Fanezzi said Zimbabwe should cut its public sector wage bill, described by finance minister Patrick Chinamasa as embarrassing, which gobbles 76 percent of government revenue and crowds out social spending and capital projects.
“The wage bill at 20 percent of GDP is plainly unreasonable, let me be clear” Panezzi said.
“You need to find a way to rein it down, that’s a major thing and that you have to improve the quality of spending because it will give more resources to protect the poor and for infrastructure. I don’t think Zimbabwe can afford such a wage bill.”
In frank remarks about the country’s nose diving economic fortunes, he said Zimbabwe was not special and has to do things right to clear its debt and attract fresh capital.
“The real issue of Zimbabwe is that the economy is not responding. Economic activity is lagging, it is very low,” said Fanezzi.
“The rest of Africa is experiencing an incredible and fast speed of growth. You should join that and that should be your objective. Don’t think that you are special.”
He said the economic growth targets set out under the government’s ZimAsset blue print, which requires $27 billion, needs international support.
“I agree with Zimbabwe authorities and we have discussed it with (finance) minister Patrick Chinamasa a number of times that the ambitious development objectives set out by the ZimAsset strategy cannot be achieved without the financial support of the international community,” he said.
“Zimbabwe faces formidable economic challenges but only sound policies can unleash strong economic potential and bring better living conditions to its population. Financial support is important to this process thus normalising financial relations with creditors is a top priority if we want to change Zimbabwe’s economy. We want to unlock access to financial support, this is why we are here.”
Also addressing delegates, Chinamasa said government would remain committed to the IMF programme adding that he would look to all capital markets to seek more funding for the country’s productive sectors.- The Source