The Finance Ministry hopes it should now be easier for Zimbabwe to approach international money lending institutions after the International Monetary Fund accepted the country's strategy for clearing its current debt of nearly $11 billion US.
Finance Minister Tendai Biti told a news conference in Harare Friday that Zimbabwe has moved at least a bit closer to being able to access international credit facilities after the International Monetary Fund (IMF) accepted its strategy for clearing its debt.
Zimbabwe has been cut off from international loans for several years because a bad economy has left the country unable to pay back previous loans.
Mr. Biti said Zimbabwe was proactive and developed its own repayment strategy, rather than waiting for the IMF to prescribe a solution for the country. What Mr.Biti and his team developed were plans called the Zimabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADS) and the Zimbabwe Accelerated Reengagement Economic Programme (ZAREP).
"Now what Zimbabwe did," Biti said, "instead of waiting for the IMF to tell us what to do, we crafted our own programs and we engaged with the IMF on our own terms. And the terms were ZAADS and ZAREP. The terms were ZAADS and ZAREP. We want to engage you guys [IMF], but these are our own terms. And part of the things we're trying to avoid was your traditional, [unclear] style of negotiation. We said, 'We can't go the route that other countries have gone through, but let's negotiate on our terms, which was ZAADS and ZAREP."
The finance minister said the IMF will now expect Harare to abide by the rule of law and do what it can to create an enabling environment for business. While the agreement with the IMF includes other commitments from Zimbabwe, the plan counts on lenders forgiving or cancelling most of the $10.7 billion US debt.
"What this will then mean," Biti explained, "is that if we are successful, when we sign this document, there are certain commitments that we are taking. But for the purpose of Zimbabwe, there are things that we said we would be able to do on our own. Which include, for instance, reporting our data, which includes, for instance, transparency on diamonds, which includes, for instance, meeting certain microeconomic targets, like low inflation. Surely we don't need the IMF to tell us that a country needs low inflation. Like growth rates, of at least 5 percent. Surely we don't need the IMF to tell us that. So this is a home-grown project."
Mr. Biti continued, "What this means is that if we reach a decision point, donors will then come in, the international community will then come in, to cancel or forgive or cancel and forgive this $10.7 billion debt. We don't have $10.7 billion US, but even if we had $10.7 billion US, it would be irresponsible for government and any finance minister to try and deal with it given the state of our schools, the state of our hospitals, and so forth."
Addressing concerns about Zimbabwe’s making financial commitments to the US based IMF, Reserve Bank governor Gideon Gono said the IMF is not an enemy of Zimbabwe but a major stakeholder in reviving the country’s ailing economy. The central bank chief warned, however, that the agreement with the IMF now enters a second phase—implementation.
"We, over the years," Mr. Gono said, "since the beginning of the inclusive government, the IMP and the other multilaterals have been trying to test the team led by the honorable minister here [Biti] to see whether they are in fact worthy of their support. And there's a lot that's been happening behind the scenes. And as a result of achieving a certain level of comfort, the IMF...is now signalling to say 'his people can be trusted. They can be trusted. They now go to phase two of that trust.'"
Cabinet has also endorsed Biti’s the ZAADS and ZAREP plans.
Under the plans, Biti said, government should prioritize job creation and poverty reduction in order to revive the country’s economy that is also expected to clear Zimbabwe’s international debts.