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Zimbabwe set to survive IMF chop

Godfrey Marawanyika

ZIMBABWE is likely to escape being axed from the International Monetary Fund (IMF), as it continues to give positive economic recovery signals by significantly moving to reduce arrears wi

th the global lender, analysts said this week.


Harare, which managed to pay US$115,16 million of its IMF debt over the past year, received a huge boost when African department director Abdoulaye Bio-Tchane, who visited the country early November — depicted a scenario of thawing relations between the two parties and tacitly indicated that Zimbabwe’s compulsory expulsion was nearly off.


And at a time Zimbabwe has been actively engaging the IMF, Bio-Tchane said, after meeting President Robert Mugabe, that the Fund was satisfied with the country’s debt settlement method.


Mugabe, himself a fierce critic of IMF-driven reforms, placed a positive gloss on Harare’s no-choice embrace of its help and this was after years of strong admonishment of the World Bank partner’s principles. He feels its 90s economic structural adjustment experiment in Zimbabwe is largely responsible for the near-collapse of the economy — six years in recession and rapidly contracting.


The anticipated escape also comes at a time Harare was given a six-month grace period to work and refine its repayment plan to the Fund around June this year.


Best Doroh, a senior analyst with banking group Zimbabwe Financial Holdings Ltd (Finhold), said the current move to pay up the IMF debts was welcome, but more could be done to improve working relations with the key multilateral funder.


“This is certainly a positive development. If we continue making those payments it shows that we are serious on mending our relationship with them.


“But we should first pay up our dues and then we would be able to start talking in terms of accessing funds again,” he said.


The Harare-based economic commentator said the existent cordial relations could only be enhanced or strengthened by more diplomatic work, which Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono has sharpened.

With the IMF having already expelled fellow African countries such as the Democratic Republic of Congo, the former Zaire and strife-torn Sudan, the Fund’s executive board was to consider Zimbabwe’s expulsion next month.

While local authorities and the IMF representative discussed macrostabilisation, substantive structural reform and governance issues, among other cooperation steps, Bio-Tchane’s statements that Harare had to grab “this window of opportunity” proved to be an olive branch.


“I explained (to the president) that the Fund wanted to work with the authorities to help Zimbabwe achieve its full potential and to integrate the country more closely with the international community,” he said.


“In order for the IMF to help Zimbabwe, the authorities need to seize this window of opportunity to demonstrate strengthened cooperation with the Fund before its executive board next considers the issue of Zimbabwe compulsory withdrawal.”


Since 1999, Zimbabwe has attained a bad boy tag from the international lending community for failing to settle outstanding dues amounting to US$1,2 billion.


Analysts say by failing to service the IMF debt, Zimbabwe was accruing interest charges to the magnitude of US$16,36 million per quarter.


Bio-Tchane’s further comments that “concerted efforts to rebuild relations with other official creditors” such as the African Development Bank and the main World Bank will over time lead to greater external financial support — to sustain Zimbabwean efforts and policies — also give rise to the hope that the country will escape pariah-status exclusion.


Although the country may escape total economic sanctions, funding will not resume immediately, the African IMF boss also said.


CFX Merchant Bank business analyst Blessing Sakupwanya said Bio-Tchane’s fact-finding mission was more than an important milestone and, therefore, Harare’s delicate handling of the discussions was likely to hand it an escape from the chop.


“The visit by the director for Africa department last week was meant to familirise the institution with what is happening on the ground. The IMF was mostly concerned with what was happening within the financial sector,” he said.


“Judging by what the director said on Zimbabwe, although he could not pre-empt (the IMF’s December agenda), it is almost certain that Zimbabwe will not be kicked out.


“From what he (Bio-Tchane) said, they are going to support us with advice, but in stages, especially in the financial sector,” Sakupwanya said.


His views corroborated what Gono said after their meetings: that they had discussed broad-ranging issues, including financial sector reforms that also include the formation of the Zimbabwe Allied Banking Group project.

The central bank governor confirmed that they were receiving “informal advice” from the Fund on a number of issues.


Another central bank official said although they had made headways in mending relations with the IMF, the country still needed to work on its creditworthiness.


“A number of investors and financiers always take a cue from the IMF to either finance or get credit. A number of institutions rely on the IMF,” he said.

As at the end of October this year Zimbabwe’s debt to the fund had declined to US$185,84 million, from a peak of US$301 million at the end of last year.


However, the global financier is still concerned with the problems affecting the country’s financial sector which has led to it revising its intial growth projection for Zimbabwe.


In May the IMF had anticipated that Zimbabwe’s gross domestic product would grow by 5% next year but because of the problems which rocked the financial sector during the third quarter it is now projecting that next year’s GDP would only grow by 1%.

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