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IMF boost for Zimbabwe

The positive outcome from Zimbabwe’s re-engagement with the International Monetary Fund (IMF) will instill confidence in the economy and bring in investors from the international community, experts have said.

BY VICTORIA MTOMBA

This follows the visit to Zimbabwe by an IMF team to review progress of reforms under the Staff Monitored Programme (SMP). The team said Zimbabwe had met the quantitative targets set and a final review was scheduled for next year.

An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic programme.

The SMP is part of Zimbabwe’s re-engagement plan with creditors whereby the country puts a credible plan on arrears clearance. This is expected to unlock fresh lines of credit badly needed to help resuscitate the economy.

Zimbabwe is under the 15-month SMP with structural and quantitative targets that the authorities have put in place as part of the re-engagement process of the country with multilateral institutions.

Reserve Bank Governor John Mangudya
Reserve Bank Governor John Mangudya

A local research firm, MMC Capital said the re-engagement process was important as it helped in building confidence in the country.

“The issue about re-engagement is not about money. What is important is investor confidence and what the authorities are doing will help us access credit. The IMF might not give us a lot of money, but the commitment brings confidence which will make us attract more investors,” MMC Capital said.

Labour and Economic Development Research Institute of Zimbabwe researcher Prosper Chitambara said while Zimbabwe made progress on some of the reforms of the SMP, it did not achieve much on the hard factors such as competitiveness and investment in agriculture.

“There is a lot of goodwill and a lot of work still needs to be done to deal with structural issues and legal reforms as the progress is slow,” Chitambara said.

Zimbabwe began engaging the international community in 2009 at the inception of the inclusive government.

The first SMP came in 2013 after IMF and Zimbabwe agreed on the plan following intensive lobbying by the inclusive government as part of its re-engagement with the global lender.

The country owes $8,4 billion which has blocked its ability to access cheap lines of credit.

Mthuli Ncube, a professor of public policy at Oxford University, said although Zimbabwe had done well under the SMP on stability in the financial sector, corporate governance and labour market reforms, it needed to go beyond that to take “its full place in the Africa rising story”.

“But it is true to say all these reforms have been beating side roads without the formal comprehensive programme.

They miss the deeper reform programme beyond the Staff Monitored Programme which is necessary for Zimbabwe,” he said.

Ncube said the country was facing global forces directly through the commodities channel and had missed the super cycle due to the use of the United State dollar which had been firming against other currencies.

The re-engagement with the IMF will see the country getting a comprehensive plan that is expected to run for three years.

The plan is dependent on Zimbabwe clearing its $1,8 billion arrears to IMF, African Development Bank and the World Bank.

Reserve Bank of Zimbabwe governor John Mangudya said re-engagement was part of the reinstatement   of Zimbabwe in the global arena. He said the country was going through difficult times and this was the time to join the rest of the world.

“We need to start by cleaning our house and putting it in order, clean the financial sector, which is what we have done. We have to put credible policies. We are faced with a stronger dollar, so how do we become competitive with a stronger dollar? We need to do internal devaluation and reduce the cost of doing business,” he said.

Mangudya said the re-engagement would help the country access long-term capital from multilateral institutions.

“We have mothballed the economy for six years now, and the time is now. We need to leap to development  and the  only way is to make sure Zimbabwe joins the rest of the world and get it’s fair share in the world,” he said.

Bankers’ Association of Zimbabwe president Somkhosi Malaba said the applications of investment implementation should be speeded up to increase the country’s foreign direct investment inflows, like what happened when Nigerian businessmen Aliko Dangote came to Zimbabwe recently.

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