By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Christine Lagarde, Managing Director (MD) of the International Monetary Fund (IMF) Thursday said Zimbabwe’s external debt is high and largely in arrears.
Lagarde made this affirmation at the approval of a Staff-Monitored Program (SMP) for Zimbabwe, covering the period April-December 2013.
“Zimbabwe’s external debt is high and largely in arrears, cutting off the country from access to most external financing sources.” She said.
According to her, in particular, Zimbabwe remains unable to access IMF resources because of its continued arrears to the Fund.
She affirmed that a strong track record of maintaining macroeconomic stability and implementing reforms, together with a comprehensive arrears clearance strategy supported by development partners, will be essential for resolving Zimbabwe’s large debt overhang.
“Zimbabwe has made considerable progress in stabilising the economy since the end of hyperinflation in 2009. Since then, Gross Domestic Product (GDP) has grown by an average of over 7 percent (7%) and inflation has remained in the low single digits, thanks largely to the multi-currency system,”She said.
The IMF MD further affirmed that Government revenues have more than doubled from 16% of GDP in 2009 to an estimated 36% of GDP in 2012, allowing the restoration of basic public services.
“The economic recovery, however, has been accompanied by very large current account deficits in recent years, while international reserves remain very low, at around one week of imports. In 2011 and 2012, sizeable public sector salary increases crowded out spending in key areas.” Lagarde noted.
She said these increases, combined with significantly lower-than-expected diamond revenue in 2012, resulted in fiscal stress, including the accumulation of domestic payments arrears, which necessitated significant adjustment in the second half of 2012. “In addition, rapid credit growth combined with slow implementation of financial sector reforms, has exacerbated financial sector vulnerabilities.” The IMF Boss said.
According to her, the strong rebound seen after the end of hyperinflation seems to have run its course. GDP growth has moderated from over 10% in 2011 to an estimated 4½% in 2012, with marginally better growth projected for 2013, as mining output expands. Going forward, sustaining high growth will require determined efforts at economic reform.
An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board. This is Zimbabwe’s first IMF agreement in more than a decade.
It also focuses on putting public finances on a sustainable course, while protecting infrastructure investment and priority social spending, strengthening public financial management, increasing diamond revenue transparency, reducing financial sector vulnerabilities, and restructuring the central bank.
