Saturday, May 16, 2009

Zim to remain mired in debt for 10 years – IMF

Zim to remain mired in debt for 10 years – IMF
Written by Kingsley Kaswende in Harare
Saturday, May 16, 2009 1:50:01 AM

ZIMBABWE'S economy may this year grow by 2.8 per cent if the country can access at least US$200 million in balance of payment support, the International Monetary Fund (IMF) has said. A detailed report entitled Staff Report: Public Information Notice on the Executive Board Discussion released on Tuesday, however, says Zimbabwe will remain mired in debt for another 10 years, even as the economy returns to growth.

It estimates that Zimbabwe, which shrank by 14.1 per cent last year, would grow by as much as 2.8 per cent this year and by at least six per cent in subsequent years if it can receive a minimum of US$200 million in budgetary aid.

The report says Zimbabwe's economic turnaround would not be possible without foreign assistance and private capital inflows, even assuming sound policy implementation.

It says for real Gross Domestic Product (GDP) growth to turn positive in 2009, official budget support of at least US$200 million [six per cent of GDP] would need to be mobilized in addition to sound policies.

“Furthermore, humanitarian assistance in the areas of food relief, health, and education may need to increase by US$200, US$300 million in 2009,” it says.

However, the IMF notes that despite a brighter short-term macroeconomic outlook, Zimbabwe will not be able to discharge its external debt service obligations in 2009.

"The Zimbabwe authorities have expressed their commitment to improve cooperation on payments to the Fund. Zimbabwe's cooperation on payments has remained poor...In light of Zimbabwe's very limited payment capacity, it would be difficult for the country to make significant payments to the Fund under the current circumstances," it states.

However, Zimbabwe has committed to regular payments to the IMF of about US $100,000 per quarter starting with the next Fund financial quarter.

Last week, the IMF resumed its technical assistance to Zimbabwe, which is likely to help in strengthening the country's capacity in resolving its arrears to the IMF.

"Assuming relatively optimistic assumptions on policies and the external environment, the present value of external debt-to-exports ratio is expected to persist above 250 per cent for almost a decade," the report says.

Debt will decline from a peak of more than 200 per cent of gross domestic product in 2010 to about 150 per cent a decade later, it adds.

Zimbabwe has so far raised about US $1 billion in credit lines from African countries that will be used to restore productivity in private and state-owned companies.

These include US$428 million from Afreximbank and the PTA Bank and about US$400 million from SADC and COMESA countries.

In April, finance minister Tendai Biti said the country needed about US $8.3 billion to restore the economy to 1998 levels.

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