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IMF, Zimbabwe Reach Agreement on Implementation of Critical Economic Reforms

The International Monetary Fund (IMF) says it has reached an agreement with Zimbabwean authorities on the implementation of critical policies and reforms designed to facilitate Zimbabwe’s reengagement with the international community.

In a statement following an IMF team’s visit to the southern African nation led by Gene Leon under a Staff Monitored Program (SMP), Leon said, “IMF staff and the Zimbabwean authorities have reached agreement on macroeconomic policies and structural reforms that can underpin a Staff Monitored Program.

“Zimbabwe is facing deep macroeconomic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hamper the functioning of the economy. In addition, Zimbabwe is facing the challenge of responding to the adverse effects on agriculture and food security of the el Nino-related drought, as well as the devastation from Cyclone Idai.”

He said the Staff Monitored Program, which will be monitored on a quarterly basis, aims to implement a coherent set of policies that can facilitate a return to macroeconomic stability.

“Successful implementation will assist in building a track record and facilitate Zimbabwe’s reengagement with the international community. The policy agenda to be monitored under the SMP is anchored on the authorities’ Transitional Stabilization Program and emphasizes fiscal consolidation, the elimination of central bank financing of the fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets.

“In addition, the agreed policies - both macroeconomic and structural - can be expected to remove critical distortions that have held back private sector growth and to improve governance. The SMP also includes important safeguards to protect the country’s most vulnerable people … This staff-level agreement is subject to review by the IMF’s management.”

The IMF staff team met with Finance Minister Mthuli Ncube, Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya, other several government and RBZ officials, and non-government representatives.

Ncube said last August the World Bank and IMF had endorsed Zimbabwe’s plan to clear $2.2 billion in arrears to international creditors,

But targeted sanctions imposed on some Zanu PF officials and companies appear to have prevented fresh loans to support the rebuilding of a shattered economy.

President Emmerson Mnangagwa has promised to revive the economy, pay foreign debts that the country has defaulted on since 1999 and end the international pariah status that Zimbabwe acquired under Robert Mugabe’s near four-decade rule.

According to Reuters, paying debt arrears could potentially open access to financing from the International Monetary Fund, World Bank and other development institutions, but the United States, which is the bank and fund’s largest member country is an obstacle.

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