Zimbabwe clears IMF arrears

24 Oct 16

Zimbabwe has cleared its $108m arrears with the International Monetary Fund after 15 years.

The IMF said the country had settled its obligations to the fund’s Poverty Reduction and Growth Trust, with which it had been in arrears since 2001.

Zimbabwe last year adopted a strategy of seeking to settle arrears with international financial institutions.

An IMF report on the country’s debt sustainability last April noted: “The Zimbabwean authorities have taken steps to exit debt distress by pressing ahead with their reengagement efforts with the international community, with the immediate objective of resolving arrears with the IMF, the World Bank Group and the African Development Bank.

“The plan involves clearing the country’s external arrears to the three IFIs through a combination of the country’s own resources, bridge financing from a regional financial institution, and a long-term loan from a bilateral creditor.”

This strategy received support from creditors and development partners during the World Bank’s October 2015 annual meeting in Lima.

Zimbabwean authorities had “started formulating an ambitious medium-term economic transformation programme to turn around the economy”, the report noted.

In a speech at the Lima meeting, Reserve Bank of Zimbabwe governor JP Mangudya said the country had been caught in a vicious circle of debt overhang, low productivity, lack of competitiveness, lack of confidence and high country risk.

It sought to break out of this, he said, through an arrears clearance strategy, together with an economic reform agenda, infrastructure development, promotion of private sector-driven growth, social development programmes and poverty eradication.

Mangudya said: “Successful resolution of Zimbabwe’s external payment arrears is expected to send positive signals, reduce perceived country risk premium and unlock affordable credit lines.”

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