Zimbabwe will not borrow externally and will cut reliance on the central bank to finance deficits during an IMF staff-monitored programme in a bid to set a track record of fiscal discipline that could earn it future funding, the IMF said.
The southern African nation owes $8.8 billion to foreign lenders, $2.6 billion of that in arrears to the World Bank, the African Development Bank and the European Investment Bank.
It has not accessed financing from international institutions since defaulting on its debt in 1999.
It is also suffering from a dollar crunch, rising inflation and public anger over shortages – all issues that have piled pressure on President Emmerson Mnangagwa who has promised to revive the economy after the fall of Robert Mugabe.
His government agreed to have its economic and political reforms monitored by the IMF from May 15 to March 15 2020 to try to convince foreign donors to restructure and forgive its debt.
In a report released on Friday, the IMF said Harare authorities pledged to only borrow RTGS $400 million from the central bank in 2019, down from RTGS $3 billion in 2018.
The treasury will also cut the government’s salary bill to 67% of the budget, down from 79% in 2018 and slash the budget deficit to 4% of GDP, in line with earlier projections, the IMF added.
The government will remove grain subsidies next year after the central bank scrapped a subsidy on fuel and ordered oil firms to buy dollars on the open market.
Economic growth in the southern African nation is, however, expected to suffer from a severe drought and a cyclone that tore through the eastern regions early in 2019.
The IMF said this would see the economy contracting by 2.1 % in 2019 before rebounding to 3.3% growth in 2020.
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