- The International Monetary Fund (IMF), which threatened with the "compulsory withdrawal of Zimbabwe" one year ago, yesterday decided to give Harare authorities one last chance to avoid expulsion. The reconciling move by the IMF had come after Zimbabwe had made larger efforts to comply with the Fund's demand during the last year, including down-payments of US$ 16.5 million.
The IMF in a statement released yesterday said it had reviewed Zimbabwe's overdue financial obligations to the Fund and considered complaints regarding Zimbabwe's compulsory withdrawal from the IMF. It had decided to "postpone a recommendation with respect to compulsory withdrawal, providing Zimbabwe with another chance to strengthen its cooperation with the Fund in terms of economic policies and payments."
The decision to provide the Harare government with "another chance" has a fortunate timing, just a little over one month before the legislative elections in Zimbabwe. It had however been made, recognising "the severity of the decision at hand, the increases in payments from Zimbabwe since the last review in July 2004, and some improvement in economic policies," the IMF statement said.
The Fund had noted Zimbabwe's payments of US$ 16.5 million to the IMF since the last review, which, however, fell short of stabilising Harare's arrears to the IMF. It further noted "the authorities' intention to further increase payments to the IMF from the second quarter of 2005, and urged Zimbabwe to make every effort to increase payments and resolve its overdue financial obligations to the IMF."
Zimbabwe has been in continuous arrears to the IMF since February 2001. As of 15 February 2005, Zimbabwe's arrears to the IMF amounted to US$ 306 million. Compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members that fail to meet their obligations.
The IMF decided to start the expulsion process of Zimbabwe in December 2003, stating that Harare had "not actively cooperated with the IMF" on meeting its financial obligations. The Fund further noted that "the adverse effects of the land reform and a drought" had led to rapidly deteriorating economic and social conditions in Zimbabwe during the last four years. GDP had declined by about 40 percent from 1999 to 2003.
Zimbabwe's problems with the IMF started in 2001, when Harare could not meet its financial obligations to the IMF. In September 2001, Zimbabwe was declared ineligible to receive further loans from the IMF. In June 2002, the Fund declared its non-cooperation with Zimbabwe and suspended technical assistance to the country. In June 2003, the Fund suspended the voting and related rights of Zimbabwe in the IMF.
Only after the decision to initiate the procedure on the compulsory withdrawal of Zimbabwe from the IMF, Harare again showed an interest in cooperating with the Fund. The government has received technical aid from the IMF to start with structural adjustment reforms and has paid significant amounts to the Fund despite the continued economic crisis in the country.
According to the Fund, yesterday's decision provides the country with "an opportunity to significantly strengthen its cooperation with the IMF, with the aim of addressing its economic decline and resolving its overdue financial obligations." The Fund is to consider Zimbabwe's compulsory withdrawal from the IMF again within six months, thus expecting further progress within that deadline.
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