Government and the International Monetary Fund (IMF) have reached an agreement on macro-economic policies and structural reforms that will underpin the country’s Staff Monitored Programme.
The IMF said on Wednesday that the SMP, which will be monitored on a quarterly basis, aims to implement a coherent set of policies that can facilitate a return to macro-economic stability.
Team leader, Mr Gene Leon, said Zimbabwe is facing macro-economic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hamper the functioning of the economy.
He, however, said the successful implementation of the SMP will assist in building a track record and facilitate Zimbabwe’s re-engagement with the international community.
In a show of confidence in Government’s economic policies, Mr Leon said the policy agenda to be monitored under the SMP is anchored on the Transitional Stabilisation Programme.
Other issues that will also be monitored under the SMP include the elimination of central bank financing of the fiscal deficit.
This comes as the country’s ballooning debt overhang was also driven by significant increase in Government overdraft at the RBZ, from US$1,4 billion in December 2017 to US$2,5 billion by September 2018.
To reduce reliance on central bank overdrafts and domestic borrowing, Government committed itself, through the Transitional Stabilisation Programme, to contain budget deficits as part of fiscal consolidation.
The SMP will also focus on adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets.
The country’s foreign exchange interbank market is going through some teething problems with little funds flowing into the system.