Zimbabwe: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Zimbabwe

Publication Date: July 11, 2014
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Summary: EXECUTIVE SUMMARY Outlook. The economic rebound experienced since 2009 has ended, with economic growth decelerating in 2013. The external position is vulnerable, with a wide current account deficit, an overvalued exchange rate, and low international reserves. The baseline scenario is marked by sluggish growth in 2014 and over the medium term, with risks clearly to the downside in the near term. Key risks to the outlook include lower than programmed tax collections, policy slippages, financial sector stress, and global commodity prices. Zimbabwe faces these risks with very thin buffers. Performance under the staff-monitored program (SMP). The SMP provided a useful anchor for Zimbabwe in an election year. However, progress in implementing the program was complicated by a long electoral process and a protracted post-election transition, as well as an adverse external environment. Thus, a number of quantitative targets and structural benchmarks were not met. Discussions on the first and second reviews are at an advanced stage. Macroeconomic policies in the near term. The economic environment remains difficult, posing significant risks to the budget and to financial stability. Policy efforts should continue to aim to restore fiscal and external sustainability and reduce financial vulnerabilities. Medium-term challenges. Zimbabwe faces serious medium-term challenges, and a vigorous reform program is needed to put the country on a sustainable, inclusive growth path. In particular, a fiscal strategy aimed at rebalancing the expenditure mix should be a priority—including to prevent the accumulation of domestic arrears. Significant financing is needed to address the infrastructure deficit and widespread poverty, as targeted under the government’s own development plans. To attract muchneeded FDI and access affordable financing, the authorities need to improve the business environment. Resolving external payment arrears. Zimbabwe’s debt situation remains a serious impediment to external sustainability and economic development. Addressing this issue will require a comprehensive arrears clearance framework underpinned by strong macro policies, in what will likely be a protracted process.
Series: Country Report No. 14/202
Subject(s): Article IV consultation reports | Economic growth | Mining sector | Diamonds | Fiscal policy | Government expenditures | External payments arrears | Fiscal reforms | Banking sector | Economic indicators | Debt sustainability analysis | Staff-monitored programs | Press releases | Zimbabwe

Publication Date: July 11, 2014
ISBN/ISSN: 9781498383028/1934-7685 Format: Paper
Stock No: 1ZWEEA2014001 Pages: 83
US$18.00 (Academic Rate:
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