IMF agreement marks new era for economic reforms

THE International Monetary Fund says the staff-level agreement on Harare’s economic policy framework and reforms will strengthen milestones the country has achieved. The IMF said on Friday that the agreement on a Staff Monitored Programme (SMP) was central to building a credible reform track record and advancing dialogue on arrears clearance and debt restructuring under the Structured Dialogue Platform. At present, Zimbabwe is unable to borrow from the IMF and other multilateral institutions due to long-standing external debt arrears.

The country has been in default on its debt since the early 2000s, which disqualifies it from accessing new financing. The debts are owed to various international financial institutions (including the World Bank, African Development Bank and European Investment Bank) and bilateral creditors. To get fresh credit from any of the institutions, Zimbabwe should first address its outstanding debt position.

Since December 2022, Zimbabwe is actively engaged in an arrears clearance and debt resolution strategy. The process is championed by former African Development Bank (AfDB) President Dr Akinwumi Adesina and facilitated by former Mozambican President Joaquim Chissano. The country is currently up to date on its financial obligations directly to the IMF.

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But multilateral lenders typically do not provide new credit if a country is in arrears (owes debt) to another multilateral institution or, in some cases, official bilateral creditors. An SMP is a crucial, informal agreement where IMF staff monitor a country’s economic reforms to build credibility, stabilise the macroeconomy and pave the way for future financial assistance. It serves as a diagnostic tool for countries to establish a track record of implementing sound economic policies.

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