Zimbabwe owes IMF US$135 million under the Poverty Reduction Growth Trust (PRGT) and the country has been in continuous arrears to the Fund since 2001.
The PRGT debt has prevented the country from accessing cheap funds from the IMF which were given to members to stabilise its finances after the global financial crisis.
Zimbabwe received about US$386 million in 2009 and has US$97 million which was escrowed pending the clearance of the PRGT debt.
In a recent report, IMF said Zimbabwe’s cooperation with the Fund on policies had weakened, and directors urged that it be strengthened.
IMF urged Zimbabwean authorities to align the execution of the 2012 budget with realistic revenue forecasts in order to return to a path towards medium-term fiscal and external sustainability, and to increase economic resilience to shocks by improving expenditure management, further strengthening financial sector prudential regulations and their enforcement, and improving the business climate.
“Directors underscored the importance of refraining from incurring non concessional liabilities, including using SDR resources, to prevent the further exacerbation of debt distress and unsustainable widening of external imbalances,” it said.
It called for the need to demonstrate the capacity and commitments to implement strengthened policies under a staff monitored programme, including by continuing timely data reporting, adopting remedial measures to resolve irregularities in employment practices, controlling the payroll, improving transparency in the diamond sector, and taking additional actions to reduce financial sector risks.
IMF said cooperation on payments remains poor, and strongly encouraged Zimbabwe to make regular and timely payments to the Fund, and to increase them as the payment capacity improves.
“Directors noted that the Fund attaches the highest importance to Zimbabwe’s prompt settlement of its arrears and urged the authorities to take action to discharge these arrears as soon as possible,” it said.
Zimbabwe is working towards normalising its relations with the fund following the restoration of its voting rights in 2010 after seven years of suspension.
The restoration of the voting rights came barely a year after the Fund resumed technical assistance to help the inclusive government restore normalcy after a decade of recession.