ZIMBABWE appears miles away from accessing international credit lines after the International Monetary Fund (IMF) cast doubts over the country’s readiness to manage fresh capital efficiently amid corruption, poor policies and excessive government expenditures.
In a statement Friday, the IMF said although it was laudable that the country had paid its arrears with the World Bank and African Development Bank, its executive board noted a number of inefficiencies and outstanding reforms still hurting the economy needed to be addressed.
The revelation flies in the face of Finance minister Patrick Chinamasa and his Zanu PF government who were expecting a lifeline at a time over 90 percent of revenue is consumed by the public service wage bill—barely leaving space for investments.
“Some progress on advancing structural reforms, notably to improve the business climate, has been made.
“However, progress on implementation of laws applicable to non-indigenous investors, improvements in the functioning of state-owned enterprises, and upgrades in public financial management, governance and accountability remain limited,” IMF said.
The organisation added, “The envisaged reengagement with the international community is facing delays. The Zimbabwean government has settled all overdue obligations to the PRGT.
“However, it is yet to reach agreement with the World Bank and other multilateral institutions on the settlement of arrears, and undertake reforms that would facilitate resolution of arrears with bilateral creditors.
“They welcomed efforts to improve the business climate, but called for comprehensive actions to provide a level playing field for investors through consistent and transparent implementation of laws, and measures to combat corruption.”
Zimbabwe’s economy declined by as much as 50 percent between 2000 and 2008. The coalition government gave a new life to the economy which recorded double digits between 2010 and 2012 ending historical hyperinflation rates.
The economy has deteriorated since Mugabe’s 2013 re-election, resulting in biting cash shortages that have seen daily withdrawal limits significantly slashed and depositors sleeping on bank queues.
Said the IMF; “Public sector employment costs remain at an unsustainable level, constraining social and infrastructure spending.
“Directors encouraged the authorities to engage only in well targeted, cost effective, and properly budgeted support to the agricultural and other productive sectors.
“They noted the potential to enhance tax revenues, and highlighted the need to strengthen public financial management and reform state owned enterprises.
“The ongoing deficit financing modalities, particularly the credit from the central bank, are unsustainable and have significant potential for generating inflationary pressures.”
According to the World Bank, Zimbabwe will record an annual inflation rate of 3, 2 percent and faces a sharp increase to 9, 6 percent by 2018 end.
While emphasising the need to work on restoring investor confidence, the international financial institution warned against continually borrowing to finance operations or pay off debts.
“(IMF) Directors cautioned against clearing arrears using modalities which exacerbate debt problems.”
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