Almot Maqolo

HARARE – The International Monetary Fund (IMF) said this week it had reached an agreement with the Zimbabwean government on macroeconomic policies and structural reforms that could underpin a Staff Monitored Program, to be monitored on a quarterly basis.

An SMP is an informal agreement between a country’s authorities and Fund staff to monitor the implementation of the authorities’ economic program. However, SMPs are neither an automatic financial assistance nor endorsement by the IMF Executive Board.

The SMP aims to implement a coherent set of policies that can facilitate a return to macroeconomic stability. A team from the IMF, led by Gene Leon, visited the Zimbabwe last week, to continue discussions on the SMP. During the short visit, IMF staff team met Finance Minister Mthuli Ncube, Reserve Bank of Zimbabwe Governor John Mangudya, other senior government and RBZ officials, and non-governmental representatives.

The IMF noted that the economically-troubled southern African nation was facing deep macroeconomic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hampered the functioning of its economy. Recently, the Breton Woods institution projected a negative growth in real (GDP) for the country – putting it at -5.2%.

The Fund also said Zimbabwe was facing the challenge of responding to the adverse effects on agriculture and food security of the el Nino-related drought, as well as the devastation from Cyclone Idai.

“The SMP, which will be monitored on a quarterly basis, aims to implement a coherent set of policies that can facilitate a return to macroeconomic stability. Successful implementation will assist in building a track record and facilitate Zimbabwe’s reengagement with the international community,” said Leon in a statement issued last night, marking the end of the visit.

“The policy agenda to be monitored under the SMP is anchored on the authorities’ Transitional Stabilization Program (TSP) and emphasizes fiscal consolidation, the elimination of central bank financing of the fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets. In addition, the agreed policies—both macroeconomic and structural—can be expected to remove critical distortions that have held back private sector growth and to improve governance. The SMP also includes important safeguards to protect the country’s most vulnerable people.”

This staff-level agreement was subject to review by the IMF’s management, Leon added. The southern African nation cleared its areas with IMF, but is still trying to find ways of clearing $2 billion worth of arrears to lenders such as the African Development Bank (AfDB) and the World Bank (WB).