By Despite being faced with many economic hurdles, including the E’l Nino draught, the International Monetary Fund (IMF) says Zimbabwe’s economy is showing some resilience.
During its second mission to Zimbabwe for new policy developments from 18 to 27 June 2024; the IMF expressed its confidence in the economy of the country saying it shows resilience, however, growth is expected to decelerate to about 2 percent in 2024, down from 5.3 percent in 2023.
Mr. Wojciech Maliszewski who led the IMF team to Zimbabwe, pointed out that the Southern Africa country is facing a devasting draught that is detrimental to its economy. Coupled with that are the high import bills that are worsening the balance-of-payment outlook.
Maliszewski says the economy of Zimbabwe is however expected to recover in 2025, he says growth is expected to reach about 6 percent supported by a rebound in agriculture and ongoing capital projects in manufacturing.
“Against this background, the Reserve Bank of Zimbabwe (RBZ) introduced in April 2024 a new currency—the Zimbabwe Gold (ZiG). The ZiG official exchange rate has so far remained stable, ending a bout of macroeconomic instability in the first 3 months of the year (when the Zimbabwean dollar depreciated by about 260 percent). Assuming that macro-stabilization is sustained, cumulative inflation in the remainder of the year is projected at about 7 percent.
“The mission welcomes improvement in monetary policy discipline and recommends further refinements to the policy framework. Price stability would be best achieved by stabilizing the ZiG nominal exchange rate against a suitable basket of currencies (accounting for the dominant role of the USD in the economy).
This could be in turn accomplished by controlling base money growth: for now through unremunerated Non-Negotiable Certificates of Deposits (NNCDs), but over time through indirect (interest-rate-based) monetary instruments to increase the attractiveness of the new currency. The exchange rate should be determined in a deeper market to provide relevant information in the decision regarding the monetary policy stance, which would require identifying and removing any remaining impediments to the functioning of the FX market to promote price discovery,” said Wojciech Maliszewski.
“The IMF maintains an active engagement with Zimbabwe and continues to provide policy advice and extensive technical assistance in the areas of revenue mobilization, expenditure control, financial supervision, debt management, economic governance and anti-corruption, and macroeconomic statistics.
However, the IMF is currently precluded from providing financial support to Zimbabwe due to its unsustainable debt situation—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears. An IMF financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and a reform plan that is consistent with durably restoring macroeconomic stability; enhancing inclusive growth; lowering poverty; and strengthening economic governance,” he continued.
