HARARE The International Monetary Fund has said it will only resume lending to Zimbabwe if the southern African state clears about $140 million in arrears and shows consistent economic reforms. (Pictured: FINANCE MINISTER Tendai Biti this month allocated $100 million for infr
The country last month won back its voting rights, in a major step towards full normalisation of relations with the Bretton Woods institution. But on Tuesday, the IMF head of mission to Article IV consultations between Zimbabwe and the Fund, Vitaliy Kramarenko, said the country had to clear outstanding arrears before it could access fresh funding. Zimbabwe has a foreign debt of nearly $6 billion.
Access to IMF lending resources would be subject to relevant IMF policies, including a track record of sound economic policies and a comprehensive strategy for the clearance of arrears to official creditors agreed among the government coalition partners and with official creditors, said Kramarenko. IMF staff will continue to maintain a close policy dialogue and provide targeted technical assistance in the context of regular visits, he said. The IMF team was in Zimbabwe between 3-17 March.
Zimbabwes economy registered its first growth in a decade last year after a new coalition government implemented measures, including the adoption of multiple currencies that doused hyper-inflation. The measures also improved availability of basic goods in shops although the country faces shortages of the main staple maize crop due to a poor agriculture season.
The IMF however maintained that the economy remains fragile. The economic recovery remains fragile and domestic and external imbalances are building up, therefore, significant policy challenges need to be addressed without delay, Kramarenko said.
He was referring to the governments heavy dependence on imports and increasing wage demands from unionists at a time the country does not have access to balance of payment support.
The governments wage bill makes up 68 percent of the national budget but salaries for state employees remain very low, averaging $150 a month. But while the IMF wants the wage bill to be trimmed, arguing that an ongoing audit of the civil service payroll had revealed many ghost workers, it says wage levels need to be improved in Zimbabwe to make the country competitive against its peers.
Kramarenko said the government should channel more resources towards infrastructure development, including programmes to support vulnerable groups and reduce its dependency on humanitarian aid.
Finance Minister Biti this month allocated $100 million for infrastructure projects such as water sanitation, power and roads construction, using resources from a $510 million IMF global fund made available last year.
Zimbabwe remains heavily dependent on humanitarian assistance to meet basic needs of its population. Continuing efforts to strengthen relations with the international community and attracting increased donor assistance, in particular in the areas of health, education, and critical infrastructure, would help improve the living conditions of ordinary Zimbabweans, said Kramarenko.
He warned that the countrys banking sector was facing increasing systemic risk, suggesting that the financial institutions were struggling with adequate capital requirements.
The central bank is heavily undercapitalised and would be unable to avoid any bank failure, analysts said. The bank has also not had a board for some time, undermining governance at the top bank.
Post published in: Economy