IMF Lifts Zimbabwe Sanctions as Ties Normalise; But Fresh Funding Far Off

The International Monetary Fund (IMF) executive board on Monday approved the removal of the remedial measures applied to Zimbabwe that had been in place because of the country’s overdue financial obligations to the Poverty Reduction and Growth Trust (PRGT).

The measures to be removed include the declaration of non-cooperation with the IMF,the suspension of technical assistance (which had already been partially lifted) and the removal of Zimbabwe from the list of PRGT-eligible countries.

“This follows Zimbabwe’s full settlement of all of its overdue financial obligations to the PRGT of SDR 78.3 million (about US$107.9 million) on October 20, 2016,” the IMF said in a statement.

Zimbabwe had been in arrears to the PRGT since February 2001 and was the only case of protracted arrears to the PRGT.

The country, which averted expulsion from the IMF in 2005 as its relationship with the Fund reached an all-time low, has actively re-engaged with the institution since 2009 and is now current on all of its financial obligations to the global lender.

However, Zimbabwe is still expected to be compliant with other applicable IMF policies in order to receive future funding.

“Notwithstanding the settlement of overdue financial obligations to the PRGT and the removal of remedial measures, consideration of any future request for IMF financing would also require Zimbabwe to comply with other applicable IMF policies”, the IMF said.

Among some of the conditions, Zimbabwe is required to resolve its arrears to multilateral creditors such as African Development Bank (AfDB), the World Bank — both owed a combined $1.7 billion in arrears, as well as other multilateral institutions, bilateral official lenders and external private creditors.

Additionally, Zimbabwe is required to implement strong fiscal adjustment and structural reforms.

In 2012, the IMF partially lifted restrictions on technical assistance to Zimbabwe, which undertook to pursue some reforms in collaboration with the IMF under its staff monitored programme — an informal arrangement with the Fund which does not entail funding.

Although Zimbabwe scored a major breakthrough in October 2015 when the IMF, World Bank and the African Development Bank agreed to a $1.8 billion arrears clearance plan, the government’s reform effort has stalled in recent months, mainly due to President Robert Mugabe’s lukewarm commitment to cutting spending and to improve the investment climate.

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