ZIMBABWE is addressing the 2014 fiscal gap and implementing policy measures aimed at improving the quality of public expenditures and enhancing financial sector stability, the International Monetary Fund has said. The IMF said in its report released on Tuesday that the Government’s performance under the Staff-Monitored Programme has been “broadly satisfactory”.
The report is based on the IMF’s combined first and second reviews under the SMP with Zimbabwe which was concluded last month.
An SMP is an informal agreement between country authorities and IMF staff to monitor the implementation of the authorities’ economic programme. The SMP represents Zimbabwe’s first IMF agreement in more than a decade.
“The Zimbabwean authorities’ performance under the SMP has been broadly satisfactory and the authorities have taken corrective measures to ensure a track record of policy implementation going forward,” the IMF said.
The Bretton Woods institution, however, noted that progress in implementing the programme was slowed by a long electoral process and a protracted post-election transition, as well as an adverse external environment.
It complemented Zimbabwe for addressing the fiscal gap. The IMF said Zimbabwe has moved forward delayed structural reforms.
In its full Article IV Concluding Statement the institution said the fiscal under-performance remains high risk if nominal wages are to exceed the budgeted nine percent in 2014.
Some of the structural reforms raised by the IMF include reducing employment costs as a proportion of the budget and the amendment to the Mines and Minerals Act in order to create a legal template which would be conducive for viability in the mining sector.
Although Zimbabwe does not currently have the capacity to service the global debt, Minister Patrick Chinamasa said the country is making token payments to show commitment to resolve the debt situation.
Government is currently consulting stakeholders in the financial services sector with a view to amend the Banking Act primarily to address issues of corporate governance. The Government is also restructuring the diamond sector to enhance accountability and transparency as well as addressing issues of consolidation of the sector.
Finance and Economic Development Minister Chinamasa said the issues raised by the IMF could not be completed in the short term.
“The authorities have reiterated their continued commitment to the policies under the SMP and to enhanced engagement with their creditors and the international community. A successful conclusion of the third review could pave the way to a successor SMP, which the authorities have indicated they may request, to build on their achievements and support a stronger policy framework,” the IMF said.
Minister Chinamasa last week said that the show of confidence by the IMF arose from what the Government is doing to restore the financial services sector and the developments in the mining sector regarding policy review and taxation on miners.
He said this increases the country’s chances of restoring relations with Bretton Woods institutions which may pave way for fresh funding.
“IMF staff will remain engaged with the authorities to monitor progress in the implementation of the authorities’ economic program, and will continue providing targeted technical assistance to support Zimbabwe’s capacity-building efforts and its adjustment and reform programme,” the institution said.