Zimbabwe lurches back into crisis as economy deteriorates

Zimbabwe has undone much of the progress registered under the International Monetary Fund’s staff monitored programme (SMP), while the economy has worsened, the fund’s resident representative said yesterday.

Zimbabwe has successfully undertaken three SMPs since 2013, informal agreements between a government and IMF staff to monitor the implementation of a particular country’s economic reforms. It does not entail resumption of funding from the multilateral finance institution.

The fund has projected negative economic growth of -0.3 percent this year and a further slide of -2.5 percent in 2017, snapping a seven-year run of positive growth.

And Christian Beddies, the IMF’s resident representative, said economic conditions were deteriorating.

“The situation is quite challenging and the conditions have been deteriorating over the past two months. There has been policy inconsistency which might not have been conducive in the terms of traction and momentum that was gained after the SMPs” Beddies told a group of academics at a local hotel.

Under the SMPs, the policy reform agenda focused on balancing the primary fiscal accounts, improving the investment climate, restoring confidence in Zimbabwe’s financial sector and garnering support for a strategy to clear arrears with multilateral institutions.

Last month, Zimbabwe cleared a 15-year old IMF debt of $108 million using its allocation of Special Drawing Rights (SDRs) allocated to all IMF member states in 2009 as part of a global financial rescue package.

It still owes the World Bank and the African Development Bank $1.15 billion and $600 million respectively.

Zimbabwe, which registered an average 10 percent economic growth between 2009 and 2012, badly needs new capital and investment to starve off a recession but needs to clear outstanding arrears and implement tough reforms.

Finance minister, Patrick Chinamasa announced a raft of measures to cut government spending in the mid-term budget in September, only for the proposals to be publicly shot down a week later.

Such inconsistencies do not generate confidence, Beddies said.

“There is need for consistent and coherent policy framework that is predictable and credible in order to establish confidence,” he said.-The Source

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