By Kelvin Mupungu
Financial snub on Harare continues
In a statement released yesterday , IMF has approved an extension of SMP programme by six months. This follows requests by Zimbabwe Finance Minister Chinamasa when he visited Washington in October 2013.
The statement read, “At the authorities’ request, IMF Management has approved a six-month extension of Zimbabwe’s Staff Monitored Program (SMP) to allow time for the national authorities to strengthen their policies and deliver on outstanding commitments under the program.”
In June 2013 the Managing Director of the International Monetary Fund approved a Staff-Monitored Program (SMP) for Zimbabwe, covering the period April-December 2013. This was Zimbabwe’s first IMF agreement in more than a decade(see http://www.imf.org/external/np/sec/pr/2013/pr13174.htm.)
By definition SMP is an informal agreement between Zimbabwe and Fund staff to monitor the implementation of the authorities’ economic program.
In October 2013 , Zimbabwe announced a five year plan aimed at rescuing the economy (ZIM-ASSET). The plan aimed at four strategic clusters, namely food security and nutrition, social services and poverty eradication, infrastructure and utilities, and value addition and beneficiation.
Liquidity problems will persist in Zimbabwean economy because SMPs do not entail financial assistance or endorsement by the IMF Executive Board.
Is he frustrated that his boss is shooting the country in the foot by continuously spitting venom at investors(photo BBC)
The extension follows Zimbabwe’s promise in a visit to Washington by Finance Minister Chinamasa during the October 2013 Annual Meetings of the IMF and the World Bank, to commit to the SMP and to the process of re engagement with the IMF and with other multilateral institutions.
As part of the extension terms, an IMF staff team will visit Harare in March 2014 to assess performance, combining the first and second reviews under the SMP. Regardless of how IMF team are going to conclude after March 2014, there still is not indication that funding restriction will be relaxed.
On December 19 2013, World Bank released a review paper on the effectiveness of relief on heavily indebted countries. -http://www.worldbank.org/content/dam/Worldbank/document/Poverty%20documents/HIPC_Fall2013_EN_web.pdf
Although Zimbabwe qualifies in theory as being “poor and heavily indebted”, World Bank just like IMF and others would not extent any lending at the moment.
Extracts from the document on the Southern African nation noted the following points:
- Zimbabwe remains in debt distress
- The nation needs to come up with a comprehensive arrears clearance framework with the international community.
- Due to arrears to the Poverty Reduction and Growth Trust (PRGT), in 2001 Zimbabwe was removed from the IMF’s list of PRGT-eligible countries.
- Zimbabwe made payments to the PRGT in 2012 totaling US$7.5 million.
- Payments so far in 2013 total US$1.3 million.
- As of end-August 2013, Zimbabwe’s arrears to the IMF and the Bank amounted to US$124 million and US$1,007 million, respectively.
- Zimbabwe’s eligibility to receive assistance under the HIPC Initiative remains unclear and uncertain.
- There is potential for Zimbabwe to improve chances for eligibility by
- Meeting end-2004 and end-2010 indebtedness criteria and
- By clearing its arrears to the PRGT.
- To receive HIPC debt relief, Zimbabwe would also need to qualify for the Initiative.
- Qualification largely depends on Zimbabwe’s levels of debt vis-à-vis exports based on the latest fiscal year data and on its policy performance.
President Mugabe and his revolutionary political party are still celebrating winning July 2013 elections against “Western backed” Morgan Tsvangirai. At every chance Mugabe gets to address the public, celebratory rhetorics are still vivid in his colourful vocabulary.
Will he tone down for the sake of starving women and children?Investor confidence is the greatest victim of his anti-West utterances.
The trouble for Mugabe is that each time he spits venom at the West, he instills shiver in the pockets of investors. Presenting his 2014 budget, Finance Minister Chinamasa said, “Business confidence remains low and Zimbabwe’s country risk premium is still high.The result is lack of investment and financial inflows…”
Chinamasa recently asked the West to take little notice of Mugabe’s utterances and help Zimbabwe. To the biggest lenders Chinamasa wanted to appease, it has not worked yet as the snub carries on.
Under Government of National Unity (GNU) with Tsvangirai, then Finance Minister Biti was trusted by lenders and had managed to open some limited credit lines. The fear among analysts is that gains of the last four years will certainly be eroded if economic current decline persists.
Period prior to July 31 elections , Mugabe showed great desire to prematurely hold elections even if all the terms of GNU had not been implemented. According to Chinamasa”economic agents “adopted a “wait and see”attitude. This intensified liquidity squeeze in the economy leading to a low demand aggregate.
These were better days for Zimbabwe.Economy grew as investors trusted the presence of “checks and balances” environment that existed. Zanu PF can not be trusted with economy?
Economy under GNU was growing at amazing 10.6% but 2013 figures were shocking downsized by Chinamasa to a mere 3.4%. Analysts even expect the figures to be too generous because Confederation of Zimbabwe Industries (CZI) 2013 report indicate that Zimbabwe economy is in “a crisis”as business were operating at less than 40 percent of capacity, many have closed or downsized.
IRIN reported that National Social Security Authority (NSSA) estimates that between July 2011 and July 2013, 711 companies in went out of business, causing 8,336 workers to lose their jobs.
Please access an assessmnt of Zimbabwe’s economic situiation here- http://www.indexmundi.com/zimbabwe/economy_profile.html
-IMF,IRIN & World Bank