On April 8, 2015, the Management of the International Monetary Fund (IMF) completed the first review under the Staff-Monitored Program (SMP)1 with Zimbabwe.
The 15-month SMP approved in October 2014 constitutes the lynchpin of the authorities’ roadmap for building a strong track record towards normalizing the relationship with Zimbabwe’s creditors and mobilizing development partners’ support. The main objective of the program is to strengthen Zimbabwe’s external position as a prerequisite towards arrears clearance, normalization of debt servicing, and restoring access to external financing. This will require further fiscal consolidation to rebuild the country’s capacity to repay; restoring financial stability; and mobilizing international support for resolving the country’s external debt situation.
Zimbabwe’s economic prospects remain difficult. Growth has slowed and is expected to weaken further in 2015. Despite the favorable impact of lower oil prices, the external position remains precarious and the country is in debt distress. Key risks to the outlook stem largely from a further decline in global commodity prices, fiscal challenges, and possible difficulties in policy implementation. However, the authorities are committed to intensifying their efforts to ensure successful implementation of the program and to lay the ground for stronger, more inclusive, and lasting economic growth.
Despite the economic and financial difficulties, the Zimbabwean authorities have made progress in implementing their macroeconomic and structural reform programs, particularly regarding clarifying the indigenization policy, restoring confidence and improving financial sector soundness, and strengthening public financial management. During 2015, the authorities’ policy reform agenda will continue to focus on: (a) reducing the primary fiscal deficit to raise Zimbabwe’s capacity to repay; (b) restoring confidence in the financial system; (c) improving the business climate; and (d) garnering support for an arrears clearance strategy.
Strong performance under the SMP would improve Zimbabwe’s repayment capacity and demonstrate that it can implement reforms that could justify a Fund-financial arrangement, which could help tackle the country’s deep-rooted problems. The Zimbabwean authorities remain committed to implementing sound macroeconomic and structural policies.
The authorities have stepped up their reengagement with creditors, including by increasing payments to the World Bank and the African Development Bank. These re-engagement steps open the way for further constructive dialogue to identify feasible options for clearing the arrears to these institutions—a key step towards seeking rescheduling of bilateral official debt under the umbrella of the Paris Club.
IMF staff will continue to support Zimbabwe’s economic reforms and their pursuit towards a debt relief strategy. Staff will remain engaged with the authorities to monitor progress in the implementation of their economic program, and will continue to provide targeted technical assistance in order to support Zimbabwe’s capacity-building efforts and its adjustment and ongoing reform process.
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.