IMF gives authorities one more chance

The International Monetary Fund (IMF) has given Zimbabwe one more chance to prove its commitment to fiscal discipline and meet its debt repayment obligations. The IMF executive board said in a statement that its decision to postpone a ruling on the compulsory withdrawal of the country from the Fund was based on "the severity of the decision at hand, the increases in [debt service] payments from Zimbabwe since the last review in July 2004, and some improvement in economic policies". Dennis Nikisi, economics professor at the University of Zimbabwe, welcomed the news that the country had been given a reprieve. He said the IMF realised that, with Zimbabwe increasing its quarterly debt service instalments from US $1.5 million to $5 million, "at least an effort is being made" by the administration to honour agreements with the Fund. However, the executive board said the payments of $16.5 million to the Fund since the last review "fell short of stabilising its arrears to the IMF". While cognisant of the authorities' intention to improve repayment to the IMF from the second quarter of 2005, the board urged Zimbabwe "make every effort to increase payments and resolve its overdue financial obligations to the IMF". The country has been in continuous arrears to the IMF since February 2001. As at 15 February 2005, the arrears amounted to US $306 million. Compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members failing to meet their obligations. Nikisi commented that although Zimbabwe still faced many economic challenges, the "fundamentals are stabilising and, while I'm not saying [economic conditions] are any better - at least there's some predictability in the way things are now going". "Year-on-year inflation [in January] was 133 percent, up from 132.7 percent - so, while everybody is concerned about that, the rise itself was quite marginal," he added. The IMF also noted that the authorities had "taken some initial policy steps to arrest the economic decline", but that "these efforts remain insufficient to decisively turn around the economic situation". The executive board called on Zimbabwe to adopt "and implement a comprehensive adjustment programme, as a matter of urgency, in the areas of fiscal, monetary, and exchange rate policies, and structural reforms". Nikisi concluded that Zimbabwe was "being given the benefit of the doubt", and believed the country would be able to meet the IMF's debt service requirements.