Press Release No. 06/22

Press Release No. 06/22

The following statement was issued today in Harare by the International Monetary Fund (IMF) mission to Zimbabwe at the conclusion of a staff visit from January 25 to February 1, 2006:

The purpose of the visit, which occurred ahead of the IMF Executive Board's review of Zimbabwe's overdue obligations to the Fund, was to conduct a review of the current economic situation and provide advice on policies to help Zimbabwe achieve sustained growth, low inflation, and improved living standards for all Zimbabweans.

As in previous rounds of discussions, including in June and August 2005, the IMF mission emphasized that Zimbabwe's economic crisis calls for urgent implementation of a comprehensive policy package comprising several mutually reinforcing actions. These include: strong fiscal adjustment; full liberalization of the exchange rate regime for current account transactions; adoption of a strong monetary anchor; elimination of quasi-fiscal activity of the Reserve Bank of Zimbabwe and transparent absorption of these losses by the budget; and fundamental structural reform, including price deregulation, public enterprise reform, strengthening of property rights, and improvements in governance. In the absence of such a comprehensive and immediate policy package, Zimbabwe's economic prospects would be bleak. Zimbabwe also needs to strengthen relations with the international community. The Fund staff stands ready to assist the authorities in designing an appropriate policy package, which would help achieve macroeconomic stability and growth and improve the welfare of the Zimbabwean people.

These discussions took place against the background of continued food shortages in Zimbabwe. The IMF mission urged the authorities to use foreign exchange to ensure adequate food imports and, in parallel, to improve the efficiency of food distribution. The provision of adequate social safety nets and food security for vulnerable groups, particularly those affected by "Operation Restore Order" and HIV/AIDS are critical priorities that should be funded by the budget.

The staff team would like to thank Zimbabwe's economic team led by Minister of Finance Herbert Murerwa, Minister of Economic Development Rugare Gumbo, and Reserve Bank of Zimbabwe Governor Gideon Gono, for useful discussions.

A further elaboration of the Fund's policy advice and Executive Board's views is given in the press statement following the Board meeting on September 9, 2005 (see Press Release No. 05/205), the Public Information Notice following the Board's conclusion of the 2005 Article IV Consultation with Zimbabwe (see PIN No. 05/139), and the 2005 Article IV staff report published on October 4, 2005.

The next Fund Board meeting to review Zimbabwe's overdue financial obligations to the IMF is tentatively scheduled for early March.