eBusiness Weekly
International Monetary Fund (IMF) managing director Christine Lagarde, has said the financial institution will continue to support Zimbabwe as the country addresses its economic challenges.
In a statement last night, Lagarde, who met with President Emmerson Mnangagwa on the sidelines of the World Economic Forum in Davos, welcomed President Mnangagwa’s commitment to stabilising the Zimbabwean economy.
She also welcomed the President’s efforts to work towards normalising the country’s engagement with the international community.
“Madame Lagarde welcomed President Mnangagwa’s commitment to stabilizing the Zimbabwean economy and working towards normalizing the country’s engagement with the international community,” said the IMF in a statement.
Reserve Bank of Zimbabwe governor Dr John Mangudya, who also attended the meeting, said “as a country we have been waiting for this for a long time.”
He added that Zimbabwe is in dire need of international capital if it is going to address its monetary challenges, retool and stimulate production.
Although Zimbabwean banks are currently sitting on more than $7 billion in deposits, deployment of these funds has been constrained by lack of foreign currency to bring in raw materials and machinery.
There has also been an element of high interests rates being charged by local banks, making borrowing an unsustainable burden that many local companies, facing competition from imported products, will not be able to carry.
In the past most companies that had borrowed from local banks had to be bailed out by the RBZ through the Zimbabwe Asset Management Company (Zamco), a vehicle that was established to absorb non-performing loans that had reached alarming levels of over $750 million soon after the introduction of the multi-currency regime.
Dr Mangudya said this kind of re-engagement with the international financial institutions will lead to the lowering of the country risk, which will in turn pave way for a reduction in the cost of foreign capital.
“There is need to strengthen re-engagement initiatives with multi-lateral financial institutions and cooperating partners as this will reduce our country risk and improve financial relations,” said Dr Mangudya.
In October 2016, Zimbabwe, which had been in arrears since 2001, settled its obligations amounting to $107,9 million to the IMF’s Poverty Reduction and Growth Trust.
Zimbabwe currently has a plan to pay off its international arrears, with a view to clear the country’s debt and unlock fresh funding.
The Lima plan was agreed in 2015, with Zimbabwe promising to clear its $1,8 billion debt to the International Monetary Fund, the World Bank and the African Development Bank.
