Thursday, November 1, 2012

IMF and Zimbabwe

Last night, The Executive Board of the International Monetary Fund (IMF) released a
press statement on its relaxation of restrictions on technical assistance to Zimbabwe
which opens the way for future staff monitored programs. Below we provide extracts
from the press statement.
The restrictions on technical assistance were a result of Zimbabwe’s protracted
financial arrears to the Poverty Reduction and Growth Trust. In relaxing the
restrictions, the IMF took into account a significant improvement in Zimbabwe’s
cooperation on economic policies, the authorities’ efforts and renewed commitment to
address its arrears problems, and Zimbabwe's severe capacity constraints in the IMF’s
core areas of expertise that represent a major risk to the implementation of the
government’s macroeconomic stabilisation program. The relaxation of the restrictions
opens the way for Zimbabwe to agree on an IMF staff monitored economic program.
Such a staff-monitored program (SMP) would mark another significant step toward
normalisation of Zimbabwe’s relations with the IMF.
SMPs are informal agreements with IMF staff whereby IMF staff provide advice to the
authorities on the design of their economic program, and monitor the implementation
of such a program. SMPs do not entail endorsement by the IMF Executive Board nor
financial assistance.
Effectively the IMF will resume technical assistance in certain new areas to support
Zimbabwe’s formulation and implementation of a comprehensive adjustment and
structural reform program that can be monitored by the staff. The current and new
areas for IMF technical assistance to Zimbabwe are in the fields of:
i) tax policy and administration;
ii) public financial management and expenditure policy;
iii) financial sector reform;
iv) central bank reform;
v) monetary and exchange policies;
vi) macroeconomic statistics;
vii) anti-money laundering and combating the financing of terrorism; and
viii)any other area that would support the formulation and implementation of a
comprehensive adjustment and reform program that can be monitored by the
This is a positive development for Zimbabwe especially in light of the recent
moderation in the economic recovery. The country needs certainty regarding policy
implementation and further reforms for the growth rates to accelerate again. The
country remains vulnerable to external shocks as the useable international reserves
remain very low at approximately 0.3 months of imports. The Minister of Finance is
due to present his 2013 National Budget on Thursday 15 November 2012.

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