IMF considers staff-monitored programme for Zim (GOOD IDEA)

HARARE The International Monetary Fund (IMF) is considering introducing a staff-monitored programme (MTP) for Zimbabwe as it warns of debt distress in the southern African country burdened with arrears of more than US$4.5 billion. The IMF executive board, which concluded an Article IV Consultation with Zimbabwe on May 17, said strict adherence to sound policies would help Harares cause in its quest to have its foreign debt cancelled and lure much-needed economic assistance from donors. Many directors were of the view that a Staff Monitored Programme (SMP) could help establish a track record of sound policies, the Fund said in a statement last week.

An SMP would see Harare surrendering to the Bretton Woods institution some of its independence in economic formulation and implementation. Similar programmes have been introduced in other crisis-torn countries, including Sudan, Togo, Liberia, Republic of Congo and the Former Yugoslav Republic of Macedonia. A more recent case is Chad where an IMF staff mission in March proposed introducing an SMP to help the African country pull through an economic crisis. According to the IMF, Zimbabwes total external debt stood at US$7,2 billion at the end of 2009 and is seen shooting seven percent this year to US$7,7 billion. Arrears on the foreign debt are seen rising from about US$4,5 billion last year to US$5,1 billion in 2010.

The IMF and other multilateral lending institutions such as the World Bank and the African Development Bank (ADB) have told Zimbabwes year-old coalition government to first its arrears with the organisations before they can entertain Harares request for budgetary assistance. The southern African country, still smarting from nearly a decade of international isolation and poor policies, desperately requires international support for reconstruction. Economic analysts believe that negotiating for debt restructuring or forgiveness is the only viable option available to Finance Minister Tendai Biti and his team as they try to reengage the international community for economic aid. Whether Biti will manage to win debt relief or forgiveness from the lending institutions ultimately depends on developments on the

political front. Western nations and lending institutions have cast a jaundiced eye on the unity government formed in February 2009 in which President Robert Mugabes Zanu (PF) has maintained a firm grip on power while allowing cosmetic political reforms. The IMF board warned that Zimbabwes economic outlook this year remained highly uncertain as a controversial black economic empowerment law scares away investors. It also said a bloated civil service wage bill was crowding out growth-oriented expenditure and worsening Harares growth prospects for 2010. Economic growth is forecast at 2.2 percent this year compared to four percent in 2009.