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Zimbabwe should diligently implement the International Monetary Fund’s staff monitored programme to qualify for international debt relief, a senior Government official has said.

Head of Zimbabwe Aid and Debt Management Office Mr Andrew Bvumbe said, inevitably, Zimbabwe needed to pass IMF’s staff monitored programme test to earn debt relief. The next SMP evaluation is due in July this year.

“If we want to get lines of credit we have to implement the International Monetary Fund’s staff monitored programme,” he said.

Zimbabwe is buckling under the pressure of its $6,4 billion debt overhang, largely owed to the IMF, World Bank and African Development Bank. This is cons- training access to credit.

Mr Bvumbe stressed that Zimbabwe needed urgent debt resolution to entertain any hope of sustained economic growth and IMF was the gatekeeper of the exit to the ultimate goal.

“We cannot resolve our debt without the endorsement of the IMF and to get the IMF’s endorsement we must successfully implement the staff monitored programme and the gatekeeper is the IMF, without that we going nowhere,” he said.

Alternative ways of resolving the debt issue will either take more time and without the endorsement of the IMF, any funding would be expensive.

Mr Bvumbe said the process to ascertain Zimbabwe’s eligibility for debt relief was ongoing and a determination on that would likely be made in August after the SMP evaluation.

The SMP entails a cocktail of prescriptive macro-economic reforms including capacitating the central bank for the lender of last resort function, addressing issues of non-performing loans in banks as well as public financial management, Government expenditure and investment in capital formation.

Government would also need to rein in its wage bill with analysts saying the success of the programme will depend on how much the wage bill is cut. Analysts say this would entail retrenchments.

If the country is deemed to have succeeded with its current SMP, which prescribes a litany of macro-economic reforms, it would earn itself debt relief under an extended SMP.

The process of debt resolution will follow the framework outlined under the Zimbabwe accelerated arrears clearance, debt and development strategy, code named ZAADDS.

“We need debt resolution. Our credit rating is very high and we cannot get cheap money,” said Mr Bvumbe.

“Debt resolution is critical, the longer the wait the bigger the debt is growing as international interest rates are bound to go up. That will impact on our current stock of debt,” he said.

Zimbabwe is being charged penal interest rates each year on the outstanding debt and this has seen nominal debt increase from $6,1 billion in 2012 to $6,4 billion by end of 2013.

Mr Bvumbe said considering $27 billion was required for programmes under Government’s medium term plan, Zimbabwe Agenda for sustainable Socio-economic Transformation, most projects may not take off due to a lack of funds.

While debt relief and re-engaging the IMF, World Bank, AfDB and the Paris club were critical, Mr Bvumbe said resolution of the issue of protracted sanctions was equally critical.

However, with Finance and Economic Development Minister Patrick Chinamasa recently revealing that most financiers he had approached for funding cited the debt overhang as the main reason for declining to assist, finality on the issue was crucial.

It is against the background that Government is mulling a forum later this year to engage bilateral and multilateral lenders on a comprehensive debt resolution strategy for Zimbabwe.

While reservations have hitherto been raised on whether debt forgiveness was achievable considering its stringent requirements, countries such as Congo and Cote d’Ivoire earned it.

However, test cases of those that failed countless times exist and a classic example is Sudan, which failed the test 14 times.

Source : The Herald