Zimbabwe's Dance with the IMF
Zimbabwe has had a long and fraught relationship with the IMF. Although the relationship has had many troughs lately, they always seem to want to work together again. The IMF has to lend money to nations, and Zimbabwe needs loans.
The Zimbabwe-IMF relationship started soon after independence. The IMF lent money to Zimbabwe for it to build capacity at the Hwange Power Station. The deal did not work out well for Zimbabwe. The work was estimated to add capacity to Hwange Power Station. It did not live up to expectations. Zimbabwe's currency depreciated and made it even more expensive to pay off the loan. During this time, Zimbabwe went through a bad drought, but the nation still prioritized paying off the loan over feeding its citizens.
Due to a mixture of bad governance, poor farm productivity, and overspending on social projects in the 1980s, the debt to GDP ratio had risen from 4%- 35% between 1980 and 1987, the Zimbabwean government found itself in need of an injection from the IMF. This was during the international lenders' Economic Structural Adjustment Programmes (ESAP) phase. Zimbabwe got its USD 750 million ESAP loan from the IMF and other lenders with disastrous effects on social and economic development.
Once again, due to bad governance and weak economic growth, Zimbabwe found itself at an impasse in 1999. This year is significant as it was when Zimbabwe chose to default on its IMF loans. The relationship between the two went from bad to worse. Since then, Zimbabwe has made mostly small payments and a few large payments to the IMF. The significant amounts came in 2005 when Zimbabwe made a USD 165 million payment and in 2016 when it made another payment of USD 110 million. These were primarily efforts to unlock fresh lending, but they did not yield anything for the government.
It was only in LIMA that the Zimbabwean government tried to mend relationships. Part of this process is to undergo a Staff Monitored Program, in which the
IMF will assess Zimbabwe's progress
in implementing reforms.
Stay tuned for more on this developing story with Exports News.
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