Although the country had met its quantitative and structural benchmarks under the third and final review of a 15-month Staff Monitored Program (SMP), Zimbabwe’s economic outlook had worsened due to drought and appreciation of the U.S. dollar against the currency of South Africa, its major trading partner, the IMF said.
“Economic difficulties have deepened. Zimbabwe can not wait and needs to act now,” said Dominico Fanizza, the head of an IMF team that was in Zimbabwe for the Article IV Consultations and the third and final review of the SMP which ended December 2015.
The Zimbabwean government has forecasted the economy to grow by 2.7 percent in 2016, higher than the 1.5 percent forecast by the World Bank.
Fanizza said following the successful completion of the SMP, Zimbabwe now needs to craft a comprehensive and ambitious economic transformation program to revive its economy and cement supports from international partners.
More efforts were required to complete the re-engagement process, fiscal disciplines should continue to be key priorities as well as improving the business environment, Fanizza said.
Zimbabwe undertook the IMF SMP as part of re-engagement efforts with international creditors that it owes 1.8 billion dollars in debt arrears.
The country made a proposal last year to clear the 1.8 billion arrears to the IMF, World Bank and the African Development Bank on the sidelines of World Bank/IMF meetings in Peru.
The creditors accepted Zimbabwe’s debt clearance plan which now awaits approval by the IMF board in May this year.
Once adopted, the debt strategy will enable Zimbabwe to start accessing fresh capital from the IMF and other multilateral creditors to help revitalize its economy.
Speaking at the same occasion, Finance Minister Patrick Chinamasa said Zimbawe was now working on producing a financing program targeting financial support from international financial institutions to revamp the economy through prioritizing power generation and revamping of agriculture and mining sectors.
“We are going to engage the IMF to ensure that there is a degree of synchronization between clearance of arrears and provision of new finance,” he said.
Chinamsa said the government would accelerate reforms and aim to reduce government wage bill to 52 percent of the national budget from the current 82 percent by 2019.
“We are going to enter into a process of a staggered reduction of the wage bill up to 2019. Hopefully by 2019 we would have gotten our wages to 52 percent of the total expenditure,” he said. Enditem