On the heels of a fairly severe International Monetary Fund statement earlier this week saying Zimbabwe would have to establish a track record of "sound policy implementation" and other credentials to obtain new financing, an IMF mission to the country has issued a surprisingly encouraging report of its own citing "positive steps...already implemented."
The earlier statement declared: "Technical and financial assistance from the IMF will depend on establishing a track record of sound policy implementation, donor support and a resolution of overdue financial obligations to official creditors, including the IMF." That seemed to dash cold water on hopes in Zimbabwe for rapid progress toward new credits for a turnaround.
The latest statement indicated Zimbabwe has taken steps on the path toward reintegration in the international financial system and, potentially, new loans for reconstruction.
An early test of Zimbabwe's credibility will come on Monday when leaders of the Southern African Development Community will consider a US$2 billion loan package for Harare.
Such bilateral loans are important because they will allow Harare to settle arrears to the IMF and other multilateral lenders on its external debt of some US$5.25 billion.
The IMF mission led by Vitaliy Karamenko was in the country from March 9 to 24 for so-called Article IV consultations to assess economic conditions and the country's policy response. The mission chief issued a statement Thursday reporting among other details an estimated 14% decline in gross domestic product in 2008 on top of a 40% drop from 2000 to 2007.
"Poverty and unemployment have risen sharply," the statement said, understating the case if anything as more than half of Zimbabweans need food aid to survive and 90% are jobless.
With the country in an "acute" economic and humanitarian crisis, it said, the recently formed unity government prepared a near-term recovery program focused on "macroeconomic policy and supply-side measures aimed at achieving low inflation, arresting economic decline, and improving social conditions." The mission praised the new government's "commitment to eliminate" central bank funding of operations and to limiting spending to revenues.
"The credibility of the government's commitment to fiscal discipline is reinforced by the adoption of the multiple currency system," said the mission report, referring to the decision to allow U.S. dollars, South African rand and other currencies to circulate alongside the essentially worthless Zimbabwe dollar for use by consumers and businesses.
Dollarization has not only quelled hyperinflation which ran at a staggering rate measured in the quadrillions or more percent, but prices have actually declined in recent months.
But, "To facilitate transactions and improve credit availability, there is an urgent need to attune the payments system and banking supervision to the needs of the multiple currency system," the mission's statement said. "Accountability and transparency of the Reserve Bank of Zimbabwe should be strengthened," it added in a circumspect comment regarding the institution some have described as the world's worst central bank.
"Regarding structural reforms," the statement continued, "a number of positive steps that are in line with previous IMF recommendations have already been implemented, including price liberalization, the removal of [foreign exchange] surrender requirements and most exchange restrictions on current account transactions, the imposition of hard budget constraints on parastatal enterprises, and the elimination of the Grain Marketing Board monopoly."
It added: "Going forward, strengthening the investment climate, ensuring protection of property rights, and maintaining wages at competitive levels will be essential for increasing domestic and foreign investment."