Zimbabwe must clear arrears to get IMF help

HARARE (Reuters) – Zimbabwe should clear arrears and implement sound policies if it is to get badly needed IMF financial and technical help to revive the country's devastated economy, the fund said on Wednesday.

The International Monetary Fund suspended Zimbabwe’s voting rights in June 2003 as the country’s economy deteriorated and President Robert Mugabe’s government fell behind on debt repayments.

A new unity government formed by Mugabe and old rival Morgan Tsvangirai has given Zimbabweans hope of rebuilding the economy but Western countries are still holding back crucial funding and demanding political and economic reforms.

The IMF and other foreign donors have in the past halted aid over policy differences with Harare, including its controversial forcible redistribution of white-owned farms among blacks.

"The IMF stands ready to continue to assist the authorities through policy advice. Technical and financial assistance from the IMF will depend on establishing a track record of sound policy implementation, donor support and a resolution of overdue financial obligations to official creditors," the IMF said in a statement.

"Going forward, strengthening the investment climate, ensuring protection of property rights, and maintaining wages at competitive levels will all be essential for increasing domestic and foreign investment," it said at the end of a two-week visit to Zimbabwe by an IMF team.

The IMF says it was owed $89 million at the end of February 2009. The World Bank says Harare owes it $600 million, and the African Development Bank says it was owed $429 million as of the end of June last year.

Tony Hawkins, a professor of business studies at the University of Zimbabwe, who met the IMF and World Bank mission last week, said the team had been encouraged by the steps taken by the new government, including preventing the central bank from running the economy. 

"But until the Western governments, who are the main IMF shareholders, change their attitude, there is no money coming our way any time soon. They want to see who is really in control and an issue that comes to mind is that the government says it will not tolerate land invasions and yet they are still continuing."

Zimbabwe’s economy is in ruins with unemployment at around 90 percent but data on Tuesday showed consumer prices fell in January and February after the government let shops use hard currency and abandon the virtually worthless Zimbabwe dollar.

The government has also launched an economic recovery programme that envisages political reforms to win back donor aid, although Western countries remain cautious.

"Making further progress in structural reforms is essential for reviving economic growth and reducing poverty. A number of positive steps that are in line with previous IMF recommendations have already been implemented, including price liberalisation," the IMF said on Wednesday.