Press Release No. 05/205

Press Release: IMF Considers the Complaint Regarding Zimbabwe's Compulsory Withdrawal from the IMF

September 9, 2005

The Executive Board of the International Monetary Fund (IMF) has reviewed Zimbabwe's overdue financial obligations to the IMF and further considered the Managing Director's complaint regarding Zimbabwe's compulsory withdrawal from the IMF (see Press Release No. 05/31). Taking into account Zimbabwe's increased payments to the IMF and its initial policy steps since the last review in February 2005, the Executive Board decided to postpone a recommendation to the IMF's Board of Governors with respect to Zimbabwe's compulsory withdrawal from the IMF. This decision provides Zimbabwe with a further opportunity to strengthen its cooperation with the IMF in terms of economic policies and payments. The Executive Board will consider again the Managing Director's complaint regarding Zimbabwe's compulsory withdrawal from the IMF within six months.

The Executive Board welcomed Zimbabwe's payments of US$131 million to the IMF since the last review, which resulted in a significant decline in the country's arrears to the IMF. The Board also noted the authorities' intention to fully eliminate arrears to the IMF by November 2006.

The Executive Board noted that Zimbabwe has taken some initial policy measures in the area of exchange rate and monetary policies since the last review, but concluded that these fell well short of what is needed to address Zimbabwe's economic difficulties. It warned that there is a significant risk that unless strong macroeconomic policies are undertaken without delay, economic and social conditions could deteriorate further. The Executive Board urged Zimbabwe to adopt and implement a comprehensive and coherent adjustment program as a matter of urgency, in the areas of fiscal, monetary, and exchange rate policies and structural reforms. The Board also stressed that providing adequate social safety nets and food security for vulnerable groups, including those affected by "Operation Restore Order" and HIV/AIDS, are also critical priorities.

Zimbabwe has been in continuous arrears to the IMF since February 2001. As of September 8, 2005, Zimbabwe's arrears to the IMF amounted to SDR 119 million (about US$175 million), or about 34 percent of its quota in the IMF. Of this amount, SDR 37 million (about US$54 million) is owed to the General Resources Account and SDR 82 million (about US$121 million) to the PRGF Trust. Compulsory withdrawal is the last step in a series of escalating measures that the IMF applies to members that fail to meet their obligations under the Articles of Agreement.