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IMF in resounding approval of Zimbabwean economic reforms, forecasts 6 percent growth

Dhaneshwar Ghura
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Washington, DC – June 16, 2021: An International Monetary Fund (IMF) staff team led by Dhaneshwar Ghura conducted a virtual staff visit with the Zimbabwe authorities during June 1–15, 2021 to discuss recent economic developments and the economic outlook.

At the conclusion of the IMF virtual mission visit, Mr. Ghura issued the following statement:

“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.

“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.

“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. To this end, the authorities’ strategy and policies as embodied in their National Development Strategy need to be fully operationalized and implemented. Durable macroeconomic stability and structural reforms would bode well for the recovery and Zimbabwe’s development objectives.

“Zimbabwe has been a Fund member in good standing since it cleared its outstanding arrears to the IMF in late 2016. The Fund provides extensive technical assistance in the areas of economic governance and financial sector reforms, as well as macroeconomic statistics. However, 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.

“The virtual IMF mission staff visit outcome will serve as a key input in the preparations for the 2021 Article IV consultation mission expected to take place later this year.

“The IMF staff held meetings with Minister Mthuli Ncube, Reserve Bank of Zimbabwe Governor John Mangudya, other senior government and RBZ officials, representatives of the private sector and Zimbabwe’s development partners.

“The IMF staff wishes to express its gratitude to the Zimbabwean authorities and stakeholders for the constructive and open spirit in which all discussions were held.”