IMF Tells Zimbabwe To Clear Arrears

The country needs nearly USD 10 billion dollars to fix its economy ruined during a decade of political instability.

“The economic recovery remains fragile and domestic and external imbalances are building up. Therefore, significant policy challenges need to be addressed without delay,” the IMF said in a statement after a staff visit to Zimbabwe.

Recently the IMF boss Dominique Strauss-Kahn told reporters in South Africa that IMF was not yet at the point where resuming lending was possible.

He had discussed Zimbabwe recently when he visited South Africa and held talks with President Jacob Zuma, who said that aid should resume flowing to Harare.

“We are happy to help. We are ready to help, but… as long as the political situation will not make it possible to come back on track in terms of arrears and governance, it will be very difficult for us to come back,” Strauss-Kahn said.

Zimbabwe owes about 140 million dollars in arrears to the IMF and an external debt of USD 6 billion.

The organisation last month restored Zimbabwe’s voting rights after a seven-year suspension, but said the impoverished country would not be able to access loans until the arrears are settled.

Zuma, southern Africa’s mediator in Zimbabwe, has lobbied for western nations and multi-lateral lenders to resume aid to Harare, where a unity government took office one year ago to curb political unrest and halt a staggering economic collapse

The Finance Minister Tendai Biti has already indicated that Zimbabwe will have to rely on its own resources to revive its economy because foreign donors were unlikely to provide nearly enough help.

Biti, a top official from Tsvangirai’s Movement for Democratic Change (MDC), said Zimbabwe would have to finance its projected budget deficit of $810 million from its own resources.

“It’s very unlikely that donors will fill that $810 million gap, we’re on our own,” Biti said recently. “Last year we got $35 million — $30 million from South Africa and $5 million from China. 2010 is going to be worse, we have to mobilise our own resources.”

IMF On Tuesday said financing to Zimbabwe remained subject to the clearing of arrears and further reforms in the fragile economy.

The IMF said economic policies in Zimbabwe had improved significantly following a decade of economic decline and hyperinflation in 2007-2008.

But the government’s wage bill needed to be reduced and budgetary expenditures to be better prioritised.

“The government needs to ensure that sufficient budgetary allocations are made to critically important infrastructure rehabilitation projects and social programmes supporting vulnerable groups while maintaining a fiscal stance consistent with macroeconomic stability,” the IMF statement said.