Improve debt management: IMF

THE executive board of the International Monetary Fund (IMF) has underscored the need for Zimbabwe to improve its debt management strategy and to opt for grants instead of loans.

Zimbabwe owes its creditors such as the IMF, World Bank, Paris Club among others something in the region of US$10 billion including arrears

In their assessment for the 2014 Article IV Consultation with Zimbabwe, IMF directors said an arrears clearance supported by partners was important.

“Directors expressed concern that Zimbabwe’s external position remains precarious. They welcomed the authorities’ commitment to rebuild external buffers. They underscored the need to improve debt management and supported the strategy to seek mainly grants and highly concessional resources, while limiting non-concessional financing to critical development projects with high economic returns.

“They noted that strong macroeconomic policies and a comprehensive arrears clearance framework supported by development partners are essential to addressing Zimbabwe’s debt problems. They encouraged the authorities to engage in coordinated discussions with the World Bank and other international financial institutions (IFIs) and called on them to respect the preferred creditor status of IFIs, avoid selective debt service, and increase payments to the Fund’s Poverty Reduction and Growth Trust as capacity to repay improves,” reads the Assessment report.

The IMF also said enhancing financial sector stability remains a priority and recommended continued vigilance in monitoring weak banks and a proactive approach to ensure an orderly resolution of insolvent non-systematic banks.

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the executive board.

At the conclusion of the discussion, the managing director, as chairman of the board, summarizes the views of executive directors, and this summary is transmitted to the country's authorities.-

Economic growth slows

SEASONED market watchers Tetrad Securities says the country might not record any growth this year if government does not put measures in place to encourage consumer spending.

Finance Minister Patrick Chinamasa projects a 6 percent growth but the World Bank has indicated that Zimbabwe can only grow by something in the region of 3.3 percent this year.

Consumer spending in the country is very low to the extent that one of the leading supermarkets in the country OK which released its results for the full year ending March 31only recorded a measly increase of 0.8percent to US$483.7 million, despite adding in new four shops.

Economic experts say OK results should a major worry as the supermarket has over the years been one of the better performing supermarket chains, out-competing their biggest rivals TM and Spar.

It is believed that TM and Spar have also suffered the same fate and have perhaps felt it more than OK, while smaller independent players who typically operate just one shop may by now be facing viability problems.

Denenga Supermarkets has closed almost all of its shops in Harare while Gutsai is struggling for market share.

In its weekly market watch report for the week ending June 6, 2014 Tetrad said the decline being recorded by supermarkets should be taken seriously.

“Zimbabwe’s economic growth has definitely slowed down and the evidence is beginning to show in the way people spend money. Retailers are an accurate and convenient point of reference but the lean times are felt far and wide.

“The marked slow-down in supermarket revenue growth is just but one of the many clues that must be taken seriously. If no fundamental change happens soon, it would not be surprising to end the year with no economic growth to speak of,” Tetrad said.

Zimbabwe is facing its worst economic downfall owing to a number of challenges chief among them high production costs, unreliable utilities, lack of fund for recapitalisation and massive imports from Asian countries.

These challenges have forced some companies to closed down while others have reportedly scaled down their operations because they are nolonger competitive against imported products.-