The International Monetary Fund has called for acceleration of economic reforms and improved coordination among fiscal, foreign exchange and monetary policies to ensure a sustained and inclusive growth in the country.
In his statement to mark the conclusion of its Staff Monitored Program, the IMF team leader Dhaneshwar Ghura said Zimbabwe’s Gross Domestic Product is expected to grow by about six percent despite a 4 and 6 percent decline in 2019 and 2020 respectively.
Ghura also hailed Zimbabwe’s resilience in the face of COVID-19 pandemic with uncertainty remaining high but noted that the outlook depended on the pandemic’s evolution and pace of vaccination as well as implementation of sustainable policies.
“Zimbabwe has shown resilience in the face of the COVID-19 pandemic and other exogenous shocks. The pandemic, on top of cyclone Idai in 2019, a protracted drought, and weak policy buffers, has taken a severe toll on the economic and humanitarian situation. Despite the authorities’ timely actions to support the most vulnerable groups and businesses during the pandemic, real GDP contracted by 4 percent in 2020, after a 6 percent decline in 2019. However, an economic recovery is underway in 2021, with real GDP expected to grow by about 6 percent, reflecting a bumper agricultural output, increased energy production, and the resumption of greater manufacturing and construction activities. Uncertainty remains high, however, and the outlook will depend on the pandemic’s evolution, the pace of vaccination and implementation of sustainable policies,” said Ghura.
He also noted Zimbabwe’s efforts to stabilize the local currency and inflation saying contained budget deficit and introduction of the foreign exchange auction system were policies in the right direction.
“The IMF mission notes the authorities’ efforts to stabilize the local currency and lower inflation. In this regard, contained budget deficits and reserve money growth, as well as the introduction of a foreign exchange auction system, are policy measures in the right direction,” said Ghura.
IMF however called for further efforts to accelerate economic reforms as well as improving coordination among fiscal, foreign exchange and monetary policies.
Ghura also called for improved business climate and reduction in governance vulnerabilities which he said are essential in sustaining inclusive growth.
“Further efforts are needed to solidify the stabilization trends and accelerate reforms. The near-term macroeconomic imperative is to improve the coordination among fiscal, foreign exchange and monetary policies, while addressing COVID-19 related economic and humanitarian challenges. In line with the last Article IV consultation, the mission highlighted that structural reforms aimed at improving the business climate and reducing governance vulnerabilities are essential for ensuring sustained and inclusive growth,” he said.
On provision of financial support from IMF, Ghura said Zimbabwe still has an unsustainable debt and external arreas while stressing that a funding arrangement would require a reform plan consistent with macro-economic stability, governance and transparency reforms among others.
“… the IMF is precluded from providing financial support to Zimbabwe due to an unsustainable debt and official external arrears. A Fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and obtaining financing assurances from official creditors; a reform plan that is consistent with macroeconomic stability, growth and poverty reduction; a reinforcement of the social safety net; and governance and transparency reforms,” Ghura added.
