IMF cuts off Zimbabwe



25th September, 2001.

The International Monetary Fund on Tuesday cut off Zimbabwe, saying it was ineligible for loans because it fell into arrears in February and that those arrears had risen to about $53 million by the end of August.

The lender said authorities in Zimbabwe had offered to make quarterly payments, but that those payments would fall short of the amount needed to stabilise the arrears.

The IMF said the actions would make the African nation ineligible for lending, including under a loan intended to help the nation tackle its poverty problems.

The IMF said it stands ready to help the government develop a plan for economic recovery as soon as possible and that it would review the overdue payments within three months.

"The IMF's executive board urged the Zimbabwean authorities to make full and prompt settlement of Zimbabwe's overdue financial obligations to the IMF," the lender said in a statement.

"The executive board urged the Zimbabwean authorities to adopt the economic and financial policies needed to enable Zimbabwe to achieve economic recovery as soon as possible," the lender said.

Earlier this month, the IMF said Zimbabwe's economy was deteriorating rapidly and its recovery depends on restoring business confidence and an orderly land reform program.

The IMF warned President Robert Mugabe's embattled government against rising inflation, growing poverty and closing down a parallel foreign exchange market thriving in the face of a severe hard currency shortage.

Zimbabwe is in its third year of recession. Analysts expect food shortages later this year or early 2002, raising the specter of civil unrest, after a sharp decline in farm output caused by disturbances on white-owned farms invaded by pro-government militants since February 2000.

The economic malaise has been worsened by the suspension of aid in 1999 by Western donors, mainly over Mugabe's controversial seizure of white-owned farmland for black resettlement without compensation.

In May, the IMF said cash-strapped Zimbabwe was late in its debt repayments to the fund. The following month, Finance Minister Simba Makoni appealed for IMF and World Bank help for Zimbabwe to fulfill its debt obligations, saying that it was determined to pay off $600 million worth of arrears.

The IMF has previously said that only comprehensive policies would provide a lasting solution to the nation's problems.