Press Release No. 05/31

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

February 16, 2005

The Executive Board of the International Monetary Fund (IMF) has reviewed Zimbabwe's overdue financial obligations to the Fund and considered the Managing Director's complaint regarding Zimbabwe's compulsory withdrawal from the IMF (see Press Release No. 03/210). Recognizing the severity of the decision at hand, the increases in payments from Zimbabwe since the last review in July 2004, and some improvement in economic policies, the Executive Board decided to postpone a recommendation with respect to compulsory withdrawal, providing Zimbabwe with another chance to strengthen its cooperation with the Fund 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 Fund within six months or at the time of the Executive Board's discussion of the 2005 Article IV consultation with Zimbabwe, whichever is earlier.

The Board's decision provides the country with an opportunity to significantly strengthen its cooperation with the IMF, with the aim of addressing its economic decline and resolving its overdue financial obligations, prior to the Executive Board's next consideration of the Managing Director's complaint.

The Executive Board noted that Zimbabwe has taken some initial policy steps to arrest the economic decline, but concluded that these efforts remain insufficient to decisively turn around the economic situation. The Board called on Zimbabwe to adopt and implement a comprehensive adjustment program as a matter of urgency, in the areas of fiscal, monetary, and exchange rate policies and structural reforms.

The Executive Board also noted Zimbabwe's payments of US$16.5 million to the IMF since the last review, which, however, fell short of stabilizing its arrears to the IMF. The Board noted the authorities' intention to further increase payments to the IMF from the second quarter of 2005, and urged Zimbabwe to make every effort to increase payments and resolve its overdue financial obligations to the IMF.

Zimbabwe has been in continuous arrears to the IMF since February 2001. As of February 15, 2005, Zimbabwe's arrears to the IMF amounted to SDR 202 million (US$306 million), or about 57 percent of its quota in the IMF. 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.