HARARE — The International Monetary Fund (IMF) said Zimbabwe's large debt remains a serious impediment to the country's financial future. Ruling out retiring Zimbabwe's $10 billion debt, which is what the country's finance minister had hoped for, the IMF report released late Tuesday said Zimbabwe's economy would slow down this year after two years of high growth. Economic analysts said unless the country’s agriculture gets back on track, Zimbabwe’s economy will not stabilize.
The IMF report said Zimbabwe’s high growth rate would slow down to five percent this year because of poor harvests and concerns about upcoming elections that will end the country’s three-year-old fragile coalition government.
The IMF predicted annual growth slowing to about four percent in the years immediately ahead.
Zimbabwe's economy had grown at a 9.6 percent rate in 2010 and a 9.4 percent rate in 2011.
The IMF report
John Robertson from Robertson Economic Information Services sums up the IMF report which said the country's huge debt remains a serious problem.
“The IMF is trying to promote us or prompt us to makes changes," said Robertson. "They do suggest that they want to see changes before they become more generous with their assistance. And they will not be supporting much in the way of assistance to the country until they see change.”
Ahead of the IMF report, Zimbabwe Finance Minister Tendai Biti was hopeful the institution would be lenient on the African country.
“We believe that our macro-economic fundamentals are sound, and that there is no reason at all why a positive decision would not be made in our favor," said Biti. "The importance of that IMF decision is that it will enable us to deal with the key issues of arrears that are the hindrance, [as] are sanctions, against Zimbabwe accessing huge levels of capital finance at the World Bank and the African Development [Bank].”
The IMF said Zimbabwe’s debt now stands at about $10.7 billion.
Recently, Zimbabwe's government refused to adopt the Highly Indebted Poor Countries (HIPC) status, which would have resulted in the country mortgaging its mineral resources against its huge debt.
Zimbabwe’s agricultural-based economy took a nosedive in early 2000 when the country embarked on a chaotic and sometimes violent land reform exercise targeting white commercial farmers, seizing their farms, and replacing many of them with peasant farmers. After a decade of decline, the economy has improved somewhat since the creation of a unity government in 2009. But Biti has said the recovery will remain weak and precarious until international institutions such as the IMF retire Zimbabwe’s debt.
The IMF and Zimbabwe's debts
Economist Robertson said the finance minister was wrong to expect IMF to be merciful to Zimbabwe.
"I think the clemency issue was not in any sense a write-off or a forgiveness of debt. The IMF does not do that," said Robertson. "They can give terms to countries that have clearly adopted policies that show that the repayments will become possible because of the new policies. But Zimbabwe has not presented any policies changes that seem to suggest to the IMF that would lead us to a better position from which to repay our debts."
The IMF said addressing Zimbabwe’s debt required strong macroeconomic policies and urged Harare to stop non-concessional borrowing and selective debt servicing since that complicates reaching an agreement with creditors. Earlier this month the IMF raised concerns over the failure by Sudan, Somalia and Zimbabwe to honor their commitments to pay their financial debts.