The International Monetary Fund on Tuesday relaxed restrictions on technical assistance to Zimbabwe, a major step towards normalising relations with the destitute southern African country.
Zimbabwe’s voting rights in the IMF were suspended in 2003 over arrears and policy differences with President Robert Mugabe’s government. Voting rights were restored in 2010, allowing Zimbabwe to again participate in IMF decision-making.
“The decision basically lifts sanctions against engagement with Zimbabwe. It’s a major step towards Zimbabwe’s debt payment programme,” Biti told Reuters.
Biti saw the move as allowing Zimbabwe to work on its programme to reduce debt owed to global creditors, including the IMF and World Bank.
“An accelerated debt repayment programme was not possible as long as those sanctions remained in place,” Biti said.
While Zimbabwe is still not able to tap IMF funding, easing the restrictions moves it in that direction.
The IMF would want to see a record of sound policies by the unity government of President Mugabe and Prime Minister Morgan Tsvangirai before it agrees to a lending programme.
“They looked at our track record and understood what we’re trying to do, as well as our growth prospects,” Biti said.
A decade of decline culminated in Zimbabwe’s economy being crushed about four years ago by hyperinflation running as high as 500 billion percent.
The unity government jettisoned the local currency in favour of the U.S. dollar and South African rand, ushering in economic stability and single-digit inflation.
Zimbabwe has proposed a repayment plan where it taps into its mineral wealth to pay debts while asking creditors to reduce some of the burden.
Its total external debt is huge, estimated at $10.7 billion, or 113.5 percent of GDP, at the end of 2011. More than half of it is in arrears.
The government recently projected growth of 8.9 percent in 2013.
There are concerns that elections required to be held next year as part of the deal to form the unity government could spark an economic crisis in a country with a history of deadly violence at the polls. Reuters