## 1. Selected Economic Indicators, 2022–30 ## Source details **Canonical URL:** [1. Selected Economic Indicators, 2022–30](https://www.imf.org/-/media/files/publications/cr/2025/english/1zweea2025001-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1zweea2025001-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1zweea2025001-source-pdf.pdf.json) --- ### Context and recent macroeconomic developments - Macroeconomic background and vulnerabilities: - Over two decades: episodes of hyper and high inflation, multiple monetary regimes and currencies, and stopped servicing most public external debt. - Recent tighter policies halted quasi-fiscal operations and monetary financing by the RBZ and helped reduce inflation and exchange rate pressures; growth recovered as extreme weather shocks subsided and terms-of-trade improved. - Persistent vulnerabilities: limited role of the ZiG, low monetary policy credibility (high dollarization, elevated parallel exchange rate premium), fiscal financing pressures, accumulation of domestic arrears. - Key historical/recent figures: - ZiG monetary base increased by around 215 percent between April 2024 and September 2024. - Overnight drop in ZiG value in the WBWS market by nearly 43 percent on September 27, 2024. - Month-on-month ZiG inflation exceeded 30 percent in October 2024. - ZiG monetary base growth slowed to around 40 percent from October 2024 to May 2025. - ZiG monthly inflation down to 0.3 percent in June 2025. - Estimated US$600 million of domestic expenditure arrears accumulated in 2024. ### Monetary, exchange rate, and external sector developments - RBZ policy responses and measures: - Stopped monetary financing after end-September 2024 drop. - Increased statutory reserve requirements for both ZiG and FX demand deposits from 15 and 20 percent, respectively, to 30 percent for both. - Raised the policy rate from 20 to 35 percent. - Raised surrender requirements to 30 percent in February 2025. - Restricted NNCD liquidation to pay taxes and participate in the WBWS market. - Exchange rate, reserves, and external flows: - Premium between WBWS and parallel exchange rates narrowed to about 30 percent. - RBZ dominant seller in WBWS; gross international reserves US$683 million by late May 2025 (covering less than one month of imports). - Current account surplus increased to 1.1 percent of GDP in 2024 (from 0.3 percent in 2023); preliminary data point to further improvements in 2025. - U.S. dollar remains main medium of exchange; ZiG share in monetary aggregates around 17 percent. - Government announced plan to transition to a “mono-currency system” by 2030 (ZiG sole legal tender) — operational clarity lacking and uncertainty increased. ### Financial sector and banking system - Key indicators (as of March 2025 unless noted): - Total capital adequacy 30 percent (regulatory minimum 12 percent). - Special mention loan ratio 27 percent. - Overall NPL ratio around 3 percent. - Loans to productive sectors account for 30 percent of assets. - Much of remaining assets in non-remunerating central bank reserves, NNCDs, and government securities. - Bank profitability dropped in Q1-2025 amid exchange rate stability. - RBZ started an Asset Quality Review on a pilot bank to correct under-provisioning and under-reporting. - Operational frictions: - Weekly release of required reserves and delays in payments for Treasury securities challenge banks’ ability to fulfill ZiG tax obligations, purchase FX, or access RBZ lending. - Banks’ net open FX positions (NOP) high at almost 60 percent in December 2024; RBZ directed reduction to 10 percent (single currency) and 20 percent (all currencies) of capital. ### Fiscal stance, financing pressures, and recommended adjustment - Fiscal and revenue developments: - Revenue ratio increased from around 11.5 percent of GDP in 2023 to 13.0 percent of GDP in 2024. - Spending pressures: higher public compensation bill; capital outlays for SADC summit; servicing debt transferred from RBZ to Treasury and debt issued in 2023 for Mutapa (about 7 percent of GDP). - Fiscal balance broadly stable between 2023 and 2024, but less financing led to domestic arrears. - Financing constraints and arrears: - By 2024 net external financing turned negative and the SDR allocation channeled for budget financing was fully used. - Estimated US$600 million domestic expenditure arrears in 2024; payment difficulties continued into 2025. - Staff projections and gap estimates: - Staff project a fiscal financing gap of about 1¼ percent of GDP in 2025 and 2026, shrinking to about ½ percent of GDP in the medium term under current and announced policies. - For 2025, current policies would generate a deficit of around ¾ percent of GDP; narrowed to ½ percent of GDP in 2026 under continuing revenue gains and stable non-interest expenditure ratios. - Below-the-line negative net financing of about ½ percent of GDP in 2025 will widen in 2026 reflecting scheduled amortizations before shrinking closer to zero in the medium term. - Debt issued to purchase assets by Mutapa adds about ¼ percent of GDP to the annual cost. - Authorities suspended debt service payments for 2025 and 2026 on some existing US$-denominated domestic treasury bonds (partial reprofiling accounted for in financing gap estimates). - Staff recommendation to close gap: - Fiscal measures of about 1¼ percent of GDP in 2025 to reduce deficits and close financing gaps without incurring new expenditure arrears. - Maintain available non-inflationary and sustainable domestic financing at estimated ¼-½ percent of GDP. - Specific PFM and fiscal actions advised: - Update revenue forecasts and expenditure plans for MDAs quarterly to align with expected cash availability; align monthly budget releases with updated expenditure plans. - Implement regulations requiring approval of large commitments by MoFED&IP and strengthen sanctions for non-compliance. - Updated expenditure plans for 2025 would require significant cuts in goods and services, transfers, and capital equivalent to about 1¼ percent of GDP, chosen to minimize disruption to essential services and projects. - Rationalize public compensation bill: public compensation now accounts for over 55 percent of government revenue; staff scenario assumes reforms yield about ¼ percent of GDP in net savings starting in 2026. - Revenue-side priorities: rationalize tax incentives; address tax avoidance and tax administration weaknesses; CIT tax gap estimated at about 3½ percent of GDP (World Bank 2025 Public Finance Review). - Strengthen mining sector taxation to generate additional ½-¾ percent of GDP in revenue. - Address revenue administration weaknesses identified in the 2025 Tax Administration Diagnostic Assessment; realize estimated gains of 1½ percent of GDP from TaRMS. - Staff conservatively project these reforms could gradually boost the revenue ratio by an estimated 1 percent of GDP in the medium term. - Protect social spending while improving targeting: maintain current level of social protection/basic public services; operationalize national social registry (pilot phase) to be reviewed by Cabinet next year. ### Outlook, risks, and scenarios - Staff baseline assumptions: - Monetary policy remains tight; fiscal financing pressures persist, limiting medium-term growth. - GDP growth expected to rebound to 6 percent in 2025; current account surplus expected to widen in 2025. - Projections assume RBZ commitment to stabilize ZiG, keep inflation relatively low, and build reserves from continued current account surpluses and gold royalties remitted to RBZ. - Without decisive fiscal adjustment, growth expected to slow to 3.5 percent in the medium term due to weak confidence, crowding out of private credit and investment, and continued domestic arrears. - Debt dynamics remain unsustainable. - Key downside risks: - Fiscal pressures could trigger return to monetary financing and financial repression, FX pressures, threats to price and financial sector stability. - Susceptibility to weather or commodity price volatility amplified by insufficient foreign reserves and less external support. - Upside possibilities: - Improved ZiG stability could raise confidence and mobilize private external financing including from diaspora. - Staff recommendation: - Upfront measures to close fiscal financing gaps and expedite monetary and FX framework reforms to minimize vulnerability. ### Selected economic projections (percent or percent of GDP) - Real GDP growth (Percent change): - 2023: 5.3 - 2024: 1.7 - 2025: 6.0 - 2026: 4.6 - 2027: 3.6 - 2028: 3.5 - 2029: 3.5 - 2030: 3.5 - Inflation (end year, Percent): - 2023: 778.8 - 2024: 686.8 - 2025: 30.7 - 2026: 12.7 - 2027: 8.0 - 2028: 8.0 - 2029: 8.0 - 2030: 8.0 - Current account balance (Percent of GDP): - 2023: 0.3 - 2024: 1.1 - 2025: 1.9 - 2026: 1.7 - 2027: 1.5 - 2028: 1.7 - 2029: 1.8 - 2030: 1.4 - Fiscal balance (Underlying overall balance, Percent of GDP): - 2023: -0.5 - 2024: -0.4 - 2025: -0.7 - 2026: -0.4 - 2027: -0.3 - 2028: -0.4 - 2029: -0.4 - 2030: -0.4 - Arrears (Domestic expenditure and external loan obligation arrears, Percent of GDP): - 2023: 0.5 - 2024: 2.0 - 2025: 1.2 - 2026: 1.1 - 2027: 0.6 - 2028: 0.5 - 2029: 0.5 - 2030: 0.6 ### Monetary policy, ZiG stabilization, and FX framework recommendations - Monetary policy stance and targets: - Tighter monetary policy instrumental in stabilizing ZiG. - Staff estimate: target growth rate of about 50 percent for 2025 would be consistent with achieving the targeted 30 percent y-on-y inflation by the end of the year. - Framework challenges: - RBZ framework described as hybrid anchor with nominal exchange rate as intermediate target and reserve money growth as operational target; concerns that anchoring/backing by composite basket may create confusion. - WBWS rate does not fluctuate in response to market conditions; RBZ FX interventions dominate market turnover. - Exchange restrictions and CFMs (including surrender requirements) interfere with FX market functioning. - Liquidity management via required reserves and NNCDs does not support monetary policy transmission or demand for ZiG; daily reserve fulfillment and weekly releases, mandatory 30-day non-interest-bearing NNCDs inhibit liquidity smoothing. - Staff recommendations: - Move to a more transparent, market-based FX system and coherent monetary framework. - Long run: more flexible FX regime and inflation targeting. - Near term: stabilize ZiG nominal exchange rate against a suitable basket as intermediate target by controlling base money growth (operational target) rather than heavy FX interventions; limit FX interventions to smoothing excessive volatility. - Specific measures: re-direct surrender requirements into the market through authorized dealers; eliminate exchange restrictions as conditions allow; phase out NNCDs and replace with indirect, tradable securities carrying market-based interest rates; relax daily reserve fulfilment to allow intertemporal smoothing; establish a deposit facility and improve access to RBZ standby lending facility. - CFMs and exchange restrictions (Box 1 highlights): - Exchange restrictions listed (rationing/allocation by RBZ; tax clearance requirement; cash margin; limits on converting ZiG into FX for certain transactions; limits on remittances; 5% administrative penalty fee; restrictions on non-registered supplier credit payments). - Surrender requirements increased from 25 percent to 30 percent in February 2025; tightening considered inappropriate and should be removed as soon as conditions allow. ### Fiscal structural policies and public financial management (PFM) - Strengthen PFM through: - Regular intra-year updates and enforcement of expenditure plans to avoid arrears and unbudgeted spending. - Record commitments at purchase order stage; subject all expenditure categories including salaries, utilities and multi-year contracts to commitment controls. - Institutionalize quarterly reporting of any new arrears. - Introduce a Treasury Single Account (TSA) and review/rationalize banking arrangements to improve Treasury payment oversight, reduce delays, enhance transparency and strengthen cash management. - Governance of Mutapa: - Amend legal provisions to clarify Mutapa’s mandate; integrate Mutapa into the budget process including dividends and asset sales; ensure corporate accountability and publication of audited financial statements. - Authorities plan to clarify Mutapa’s mandate in upcoming amendments; an external audit of Mutapa’s financial accounts is under way. - Authorities’ stance: - Prefer more gradual adjustment; expect revenues to be higher by about 0.3 percent of GDP in 2025 and additional financing from sale of land title deeds. - Plan to curtail cash spending and partly repay arrears, implying a slower adjustment focused on ensuring sufficient payments to suppliers to avoid disrupting essential services. ### Debt level, sustainability assessment, and reengagement strategy - Debt assessment and key figures: - Debt assessed as unsustainable and in distress. - Total public and publicly guaranteed debt: US$23.3 billion (72.9 percent of GDP) at end-2024. - External debt stock: US$16.7 billion (52.5 percent of GDP) at end-2024. - External arrears to official creditors: estimated at US$7.4 billion (23.2 percent of GDP) at end-2024. - Arrears to external commercial creditors: estimated at US$47.4 million at end-2024. - Suspended servicing of some domestic debt obligations: US$425 million (0.8 percent of GDP) in 2025. - Required mix to restore sustainability: - Balanced fiscal consolidation, strengthened public debt management, growth-promoting structural reforms, and external arrears resolution to enable new financing from multilateral and bilateral official creditors. - Reengagement and debt resolution: - Structured Dialogue Platform (SDP) framework: three pillars—(i) economic reforms; (ii) political-governance reforms; (iii) farmers’ compensation and land tenure reforms. - Roadmap to clearing arrears to IFIs will be essential and would likely need support from a bridge loan; discussions ongoing. - Creditors have called for an IMF Staff Monitored Program (SMP) to be in place before engaging on such financing; staff indicated an SMP-supported program would need alignment with Article IV and capacity development advice. - Authorities initiated discussions with commercial creditors on payment moratoria; will engage advisors to develop arrears clearance and debt resolution strategy. - Eligibility uncertainty: - Unclear whether Zimbabwe would be eligible for G20 Common Framework or HIPC due to protracted arrears and income criteria; official creditors may provide ad hoc treatment consistent with restoring debt sustainability (examples cited). ### External sector assessment (Annex I) — highlights - Overall assessment: - External position in 2024 weaker than level implied by fundamentals and desirable policies. - Key drivers: high external debt in distress, critically low foreign reserves, large REER overvaluation. - Data shortcomings (C ratings for external sector statistics) increase uncertainty. - Current account and reserves: - CA surplus 1.1 percent of GDP in 2024 (from 0.3 percent in 2023), driven by gold exports and remittances. - Adjusted current account balance: -0.4 percent of GDP; adjusted current account norm: 1.7 percent of GDP; current account gap: -2.1 percent of GDP. - FX reserves: US$484 million by end-December 2024; gross international reserves remain significantly below adequate levels (inadequate to cover one month of imports at end-2024); IMF toolkit benchmark for LICs suggests 5.4 months of imports adequate for Zimbabwe. - Real exchange rate: - WBWS rate depreciated by about 45 percent on September 27, 2024. - Based on elasticity of -0.2, the CA gap implies an overvaluation of the REER by 13.6 percent. - Policy guidance: - Liberalize FX market to provide information for monetary policy, implement fiscal consolidation, and pursue growth-friendly policies to strengthen trade balance and build confidence to attract private capital inflows. ### Data issues, national accounts revisions, and AML/CFT - Data quality and national accounts: - CPI historically blended U.S. dollar and local currency; following ZiG introduction CPI based on ZiG prices reported as analytical series while blended CPI remains headline. - National accounts revised to reflect ZiG and 2024 Economic Census; upward revision to nominal GDP of about 26 and 40 percent in 2023 and 2024, respectively. - Monetary data adequate in central bank surveys but coverage should be expanded to other financial corporations; FSIs missing. - Authorities transitioning to accrual-based fiscal reporting; timely and accurate data on arrears missing; SOE data gaps persist. - Data adequacy for surveillance: - The data provided to the Fund is adequate for surveillance but with significant shortcomings (coverage, consistency, large errors and omissions in external statistics); STA stands ready to assist. - AML/CFT progress and priorities: - Electronic register for beneficial ownership established; 2024 NRA completed. - 2024 NRA: "medium low" money laundering threat; institutional vulnerability rated "medium high". - Priorities: expedite company registration on BO register; strengthen capacity and law enforcement for ML/TF; identify PEPs and implement preventative measures. - Authorities plan legal instrument to set a registration deadline, use 2024 NRA to inform 2025-2029 AML/CFT Strategy; Financial Intelligence Unit to engage development partners for capacity building; Anti-Corruption Commission to develop an "anti-corruption preventive measures toolkit" and establish an integrity commission for Mutapa. ### Financial soundness, macro data (selected numerical highlights) - Output and prices (selected): - Real GDP growth (constant 2019 prices): 2022: 6.1; 2023: 5.3; 2024 (Act.): 1.7; 2025 (Proj.): 6.0. - Nominal GDP (US$ millions): 2022: 48,570; 2023: 44,447; 2024 (Act.): 45,719; 2025 (Proj.): 49,584. - CPI (end-of-period): 2023: 778.8; 2024 (Act.): 686.8; 2025 (Proj.): 30.7. - Money and credit: - M2 (US$ or ZiG depending on table) levels: 2022: 393.3; 2023: 712.9; 2024 (Act.): 930.8. - M2 annual percent change series (2025–2030): 46.1; 30.6; 20.3; 18.0; 17.8; 17.3. - Monetary base (levels): 2022: 300.2; 2023: 1,842.7; 2024 (Act.): 2,421.3. - Reserves and external flows: - Current account (US$ millions; percent of GDP): 2024 (Act.): 501 (1.1 percent of GDP); 2025 (Proj.): 961 (1.9 percent of GDP). - Reserve assets (US$ millions): 2022: 597; 2023: 110; 2024 (Act.): 484; 2025 (Proj.): 800. - Months of import cover (2022–2025): 0.7; 0.1; 0.5; 0.9. - Public debt and arrears (selected): - Consolidated public sector debt (US$ millions): 2024 (Act.): 23,278. - Consolidated public sector debt (percent of GDP): 2024 (Act.): 72.9. - Public and publicly guaranteed external debt (US$ millions): 2024 (Act.): 16,745. - Arrears on public external debt (US$ millions): 2024 (Act.): 11,909. - Financial soundness indicators (Dec-2019 to Dec-2024 selected): - Regulatory capital to risk-weighted assets: Dec-2024: 29.4. - Past-due loans to gross loans (aggregate): Dec-2024: 32.5. - Nonperforming loans (past due > 90 days): Dec-2024: 3.4. - Return on assets: Dec-2024: 19.0. - Liquid assets/total assets: Dec-2024: 33.7. - Loans/deposits: Dec-2024: 65.0. - Foreign exchange liabilities/total liabilities: Dec-2024: 82.6. ### Risk Assessment Matrix — selected high-likelihood/high-impact risks and policy responses - Trade policy and investment shocks — Likelihood: High; Expected impact: Medium; Policy response: implement AfCFTA, step up structural reforms to attract FDI. - Deepening geoeconomic fragmentation — Likelihood: High; Expected impact: High; Policy response: AfCFTA implementation, structural reforms. - Fiscal policy slippages — Likelihood: High; Expected impact: High; Policy response: take upfront measures to close financing gap; prepare contingency plan; improve revenue collection and streamline spending. - Climate change — Likelihood: Medium; Expected impact: High; Policy response: seek humanitarian support; create fiscal space for grain imports; rationalize agricultural support schemes. *Source: IMF staff estimates and Zimbabwean authorities as presented in the IMF staff report material (1zweea2025001-source-pdf).* ### 1. Selected Economic Indicators, 2022–30 _________________________________________________________ 25 ### 1. Selected Economic Indicators, 2022–30 ### Context and recent macroeconomic developments - Over the past two decades Zimbabwe experienced numerous episodes of hyper and high inflation, multiple monetary regimes and currencies, and stopped servicing most of its public external debt. - Recent tighter policies—halting quasi-fiscal operations and monetary financing by the RBZ—helped reduce inflation and exchange rate pressures; growth recovered as extreme weather shocks subsided and terms-of-trade improved. - Persistent vulnerabilities: - Role of the ZiG is limited; monetary policy credibility remains low as indicated by high dollarization and an elevated parallel exchange rate premium. - Fiscal financing pressures and accumulation of domestic arrears threaten stability. - Key historical and recent figures: - ZiG monetary base increased by around 215 percent between April 2024 and September 2024. - Overnight drop in ZiG value in the WBWS market by nearly 43 percent on September 27, 2024. - Month-on-month ZiG inflation exceeded 30 percent in October 2024. - ZiG monetary base growth slowed to around 40 percent from October 2024 to May 2025. - ZiG monthly inflation down to 0.3 percent in June 2025. - An estimated US$600 million of domestic expenditure arrears accumulated in 2024. ### Monetary, exchange rate, and external sector developments - RBZ policy responses and measures: - Stopped monetary financing after end-September 2024 drop. - Increased statutory reserve requirements for both ZiG and FX demand deposits from 15 and 20 percent, respectively, to 30 percent for both. - Raised the policy rate from 20 to 35 percent. - Raised surrender requirements to 30 percent in February 2025 to boost capacity for FX interventions. - Restricted NNCD liquidation to pay taxes and participate in the WBWS market. - Exchange rate and reserves: - Premium between WBWS and parallel exchange rates narrowed to about 30 percent. - RBZ dominant seller in WBWS market; gross international reserves US$683 million by late May 2025, covering less than one month of imports. - Staff assess the external position to be weaker than implied by fundamentals and desirable policies (Annex I). - External flows and composition: - Current account surplus increased to 1.1 percent of GDP in 2024 (from 0.3 percent in 2023). - Surplus driven by gold exports and remittances. - Preliminary data point to further improvements in 2025 despite partial loss of USAID assistance. - Dollarization and currency transition plans: - U.S. dollar remains main medium of exchange, store of value, and unit of account. - Share of ZiG in monetary aggregates around 17 percent. - Government announced plan to transition to a “mono-currency system” by 2030 (ZiG becoming sole legal tender); lack of clarity on operational implications increased uncertainty. ### Financial sector and banking system - Key banking sector indicators (as of March 2025 unless otherwise noted): - Total capital adequacy 30 percent (regulatory minimum 12 percent). - Special mention loan ratio 27 percent. - Overall NPL ratio around 3 percent. - Loans to productive sectors account for 30 percent of assets. - Much of remaining assets allocated to non-remunerating central bank reserves, NNCDs, and government securities. - Bank profitability dropped in Q1-2025 amid exchange rate stability. - RBZ started an Asset Quality Review on a pilot bank to correct under-provisioning and under-reporting of problematic assets. - Operational and market frictions: - Weekly release of required reserves and delays in payments for Treasury securities create challenges for banks to fulfill ZiG tax obligations, purchase FX, or access RBZ lending. ### Fiscal stance, financing pressures, and recommended adjustment - Fiscal and revenue developments: - Revenue ratio increased from around 11.5 percent of GDP in 2023 to 13.0 percent of GDP in 2024. - Spending pressures: higher public compensation bill, capital outlays for SADC summit, servicing of debt transferred from RBZ to Treasury and debt issued in 2023 for Mutapa (about 7 percent of GDP). - Fiscal balance remained broadly stable between 2023 and 2024, but less financing led to domestic arrears. - Financing constraints and arrears: - By 2024 net external financing turned negative and the SDR allocation channeled for budget financing was fully used. - Estimated US$600 million domestic expenditure arrears in 2024; payment difficulties continued into 2025. - Staff projections and gap estimates: - Staff project a fiscal financing gap of about 1¼ percent of GDP in 2025 and 2026, shrinking to about ½ percent of GDP in the medium term under current and announced policies. - For 2025, current policies would generate a deficit of around ¾ percent of GDP; narrowed to ½ percent of GDP in 2026 under continuing revenue gains and stable non-interest expenditure ratios. - Below-the-line negative net financing of about ½ percent of GDP in 2025 will widen in 2026 reflecting scheduled amortizations before shrinking closer to zero in the medium term. - The debt issued to purchase assets by Mutapa adds about ¼ percent of GDP to the annual cost. - Authorities suspended debt service payments for 2025 and 2026 on some existing US$-denominated domestic treasury bonds (partial reprofiling accounted for in financing gap estimates). - Staff recommendation to close gap: - Staff recommend fiscal measures of about 1¼ percent of GDP in 2025 to reduce deficits and close financing gaps without incurring new expenditure arrears. - Maintain available non-inflationary and sustainable domestic financing at estimated ¼-½ percent of GDP. - Specific policy actions advised: - If the authorities’ preferred approach of curtailing spending in case of revenue shortfalls is followed, it must be supported by PFM improvements: - Update revenue forecasts and expenditure plans for MDAs to align with expected cash availability on a quarterly basis. - Align monthly budget releases with updated expenditure plans. - Implement regulations requiring approval of large commitments by the MoFED&IP. - Strengthen sanctions for non-compliance. - Updated expenditure plans for 2025 would require significant cuts in goods and services, transfers, and capital equivalent to about 1¼ percent of GDP, chosen to minimize disruption to essential services and projects. - Rationalize public compensation bill: - Public compensation now accounts for over 55 percent of government revenue. - Authorities preparing a rationalization strategy based on the Public Service Commission’s “Job Evaluation Report”; staff scenario assumes reforms yield about ¼ percent of GDP in net savings starting in 2026. - Revenue-side priorities: - Rationalize tax incentives and address tax avoidance and tax administration weaknesses. - CIT tax gap estimated at about 3½ percent of GDP (World Bank 2025 Public Finance Review). - Strengthen mining sector taxation to generate additional ½-¾ percent of GDP in revenue. - Address revenue administration weaknesses identified in the 2025 Tax Administration Diagnostic Assessment; realize estimated gains of 1½ percent of GDP from the new Tax and Revenue Administration System (TaRMS). - Staff conservatively project these reforms could gradually boost the revenue ratio by an estimated 1 percent of GDP in the medium term. - Protect social spending while improving targeting: - Maintain current level of spending on social protection and basic public services. - Improve targeting by establishing and operationalizing a national social registry (now in a pilot phase) to be reviewed by Cabinet next year in context of National Social Protection policy framework. ### Outlook and risks - Staff baseline assumptions: - Monetary policy remains tight; fiscal financing pressures persist, limiting medium-term growth. - GDP growth expected to rebound to 6 percent in 2025. - Current account surplus expected to widen in 2025. - Projections assume RBZ commitment to stabilize ZiG, keep inflation relatively low, and build reserves from continued current account surpluses and gold royalties remitted to RBZ. - Without decisive fiscal adjustment, growth expected to slow to 3.5 percent in the medium term due to weak confidence, crowding out of private credit and investment, and continued domestic arrears. - Debt dynamics remain unsustainable (See DSA). - Key downside risks: - Unaddressed fiscal pressures could trigger return to monetary financing and financial repression, FX pressures, and threats to price and financial sector stability. - Susceptibility to weather or commodity price volatility is exacerbated by insufficient foreign reserves and less external support due to scaling back of overseas development assistance. - Staff recommend upfront measures to close fiscal financing gaps and expedite monetary and FX framework reforms to minimize vulnerability. - Upside possibilities: - Improved ZiG stability could raise confidence and mobilize private external financing including from diaspora. - Authorities’ views: - Authorities project higher medium-term growth (5 percent) than staff, attributing macro instability to multiple causes including climate shocks, commodity price volatility, and geopolitical tensions. - Both staff and authorities expect monthly inflation to remain low with exchange rate stability, reducing annual inflation significantly in 2025-26. ### Selected economic projections (percent or percent of GDP) - Real GDP growth (Percent change): - 2023: 5.3 - 2024: 1.7 - 2025: 6.0 - 2026: 4.6 - 2027: 3.6 - 2028: 3.5 - 2029: 3.5 - 2030: 3.5 - Inflation (end year, Percent): - 2023: 778.8 - 2024: 686.8 - 2025: 30.7 - 2026: 12.7 - 2027: 8.0 - 2028: 8.0 - 2029: 8.0 - 2030: 8.0 - Current account balance (Percent of GDP): - 2023: 0.3 - 2024: 1.1 - 2025: 1.9 - 2026: 1.7 - 2027: 1.5 - 2028: 1.7 - 2029: 1.8 - 2030: 1.4 - Fiscal balance (Underlying overall balance, Percent of GDP): - 2023: -0.5 - 2024: -0.4 - 2025: -0.7 - 2026: -0.4 - 2027: -0.3 - 2028: -0.4 - 2029: -0.4 - 2030: -0.4 - Arrears (Domestic expenditure and external loan obligation arrears, Percent of GDP): - 2023: 0.5 - 2024: 2.0 - 2025: 1.2 - 2026: 1.1 - 2027: 0.6 - 2028: 0.5 - 2029: 0.5 - 2030: 0.6 *Source: IMF staff estimates.* ### 18. To be sustainable, the adjustment must be accompanied by fiscal structural policies to ### 18. To be sustainable, the adjustment must be accompanied by fiscal structural policies to ### Fiscal structural policies and public financial management (PFM) - Strengthen public financial management through: - Regular intra-year updates and better enforcement of expenditure plans to avoid arrears and prevent unbudgeted spending. - Expanding PFM coverage and strengthening effectiveness by recording commitment at purchase order stage and subjecting all expenditure categories to commitment controls, including recurring expenditure (salaries and utilities) and commitments from multi-year contracts. - Institutionalizing quarterly reporting of any new arrears. - Introducing a Treasury Single Account (TSA) and reviewing and rationalizing banking arrangements to: - Improve oversight of the Treasury payment process. - Reduce delays. - Enhance transparency and accountability. - Strengthen cash management. ### Governance of Mutapa - Priorities to control fiscal risks related to Mutapa: - Amend legal provisions applicable to Mutapa (and companies under its control) to clarify its mandate. - Integrate Mutapa into the budget process, including proceeds obtained from dividends and asset sales. - Ensure adherence to highest standards of corporate accountability and transparency through appropriate oversight, disclosure, and publication of audited financial statements. - Authorities’ actions: - Authorities plan to clarify Mutapa’s mandate in upcoming amendments to the enabling Act. - An external audit of Mutapa’s financial accounts is under way. ### Authorities’ views on fiscal pressures and reforms - Authorities agreed on need to address fiscal pressures but prefer a more gradual adjustment scenario. - They acknowledge fiscal financing gaps under current policies but expect: - Revenues to be higher by about 0.3 percent of GDP in 2025. - Additional financing from sale of land title deeds. - Authorities expect strengthened administrative revenue efforts to close remaining financing gap. - On arrears: - Hope to fully prevent medium-term buildup of new domestic arrears, but view this year’s prevention as unrealistic given structural PFM weaknesses. - Plan to curtail cash spending and partly repay arrears, implying a slower adjustment focused on ensuring sufficient payments to suppliers to avoid disrupting essential services and projects. - Support for medium-term reform agenda: - Implementation of findings from the “Job Evaluation Report”. - Strengthening the PFM system with IMF technical assistance. - Continued work on tax incentive rationalization; argued most gains achieved with removal of Special Economic Zone tax incentives from the mining sector. - Commitment to improving taxpayer compliance. ### Debt level, sustainability assessment, and required actions - Debt assessment: - Debt is assessed as unsustainable and in distress (see DSA). - Total public and publicly guaranteed debt: US$23.3 billion (72.9 percent of GDP) at end-2024. - External debt stock: US$16.7 billion (52.5 percent of GDP) at end-2024. - External arrears to official creditors: estimated at US$7.4 billion (23.2 percent of GDP) at end-2024. - Arrears to external commercial creditors: estimated at US$47.4 million at the end of 2024 (0.1 percent of GDP). - Suspended servicing of some domestic debt obligations: amounting to US$425 million (0.8 percent of GDP) in 2025. - Conclusion: Current policies are insufficient to restore debt sustainability. - Required mix to restore sustainability: - Balanced fiscal consolidation. - Strengthened public debt management. - Growth-promoting structural reforms. - External arrears resolution to enable new financing from multilateral and bilateral official creditors. ### Reengagement with creditors and debt resolution strategy - Structured Dialogue Platform (SDP) framework: dialogue on three key pillars: - (i) economic reforms; - (ii) political-governance reforms; - (iii) farmers’ compensation and land tenure reforms. - Bilateral Paris Club creditors require progress on all three pillars for reengagement. - Authorities have engaged financial and legal advisors to develop arrears clearance and debt resolution strategy and facilitate creditor discussions. - Roadmap to clearing arrears to IFIs (World Bank, African Development Bank, European Investment Bank) will be essential and would likely need support from a bridge loan. - Discussions on a potential bridge loan are ongoing. - Creditors have called for an IMF Staff Monitored Program (SMP) to be in place before engaging on such financing. - Staff indicated an SMP-supported program would need to be broadly aligned with Article IV and recent capacity development advice. - Authorities have initiated discussions with key commercial creditors on debt payments moratoria. - Successful debt resolution requires: - Reconciliation of Zimbabwe's debt. - Establishment of clear restructuring parameters. - Eligibility uncertainty: - Unclear whether Zimbabwe would be eligible for G20 Common Framework or HIPC Initiative due to non-eligibility from protracted arrears to multilateral creditors, and for HIPC due to income exceeding end-2004 and end-2010 criteria for IDA eligibility. - Official creditors may provide ad hoc treatment consistent with restoring debt sustainability, as in other cases (e.g., Sri Lanka, Suriname). ### Authorities’ views on debt reengagement - Authorities broadly agree with unsustainable debt assessment and are committed to reengagement for debt resolution and arrears clearance. - Noted recent SDP progress, including an initial payment to farmers covered by bilateral investment agreements. - Plan to launch a fourth SDP pillar and a working group dedicated to debt resolution to bring together creditors and provide updates on government roadmap. - Emphasized criticality of process as financing options have narrowed due to constrained access to concessional financing and increasingly difficult access to non-concessional commercial lenders and the domestic capital market. ### Monetary policy, ZiG stabilization, and targets - Tighter monetary policy has been instrumental in stabilizing the ZiG. - Current tight monetary policy stance reflected in measured increases in the ZiG component of reserves money. - Staff estimate: target growth rate of about 50 percent for 2025 would be consistent with achieving the targeted 30 percent y-on-y inflation by the end of the year. ### Monetary and exchange rate framework challenges - RBZ framework described as a hybrid monetary anchor with nominal exchange rate as an intermediate target, stabilized by keeping reserve money growth under check; claims ZiG operates under a floating exchange rate and local currency component is anchored and fully backed by a composite basket of reserves (2024 Mid-Term Monetary Policy Statement). - Identified interrelated challenges: - Anchoring and backing of the ZiG by a composite basket of reserves may create confusion about the nominal anchor—these notions are typically associated with a fixed parity. - The WBWS exchange rate does not appear to fluctuate in response to market conditions; RBZ FX interventions dominate market turnover, stabilizing the rate within a narrow range, inconsistent with a floating exchange rate arrangement. - Exchange restrictions and capital flow measures (CFM), including increase in surrender requirements, interfere with FX market functioning. - Liquidity management through required reserve and NNCDs does not support monetary policy transmission, market development, or demand for ZiG: - Banks required to fulfil reserve requirement daily and can only get a release of any remaining balance weekly. - Banks required to purchase 30-day non-interest-bearing NNCDs when ZiG liquidity exceeds discretionary levels computed by the RBZ for each bank. - These practices prevent liquidity smoothing, increase interest rate volatility, do not promote active liquidity management by banks or money market development, and impose increasing costs on banks given relatively fast buildup of FX reserves through surrender requirements that needs sterilization. ### Staff recommendations for FX and monetary framework - Move to a more transparent, market-based FX system and more coherent monetary policy framework to establish ZiG as a stable, widely used national currency. - In the long run: recommend a more flexible FX regime and inflation targeting. - Near term: recommend achieving price stability by stabilizing the ZiG nominal exchange rate against a suitable basket of currencies (intermediate target) by controlling base money growth (operational target) through appropriate calibration of domestic liquidity conditions rather than FX interventions. - Limit FX interventions to smoothing excessive volatility while allowing the exchange rate to reflect market conditions. - Specific measures required: - Reduce RBZ’s footprint and restrictions in the FX market: - Gradually re-direct surrender requirements into the market through authorized dealers and eliminate market barriers from exchange restrictions (Box 1), in line with IMF’s latest Article VIII recommendations. - Narrow gap between WBWS and parallel market rates, bolster confidence in ZiG, and reduce economic distortions. - In the longer term, relax CFMs gradually alongside a comprehensive package of macroeconomic, financial, and structural policies. - Improve liquidity management and monetary control: - Introduce more effective monetary policy instruments. - Reduce role of direct monetary instruments by phasing out NNCDs and replacing them with indirect, tradable securities carrying a market-based interest rate. - Relax daily fulfillment of reserve requirements, allow intertemporal smoothing, and release any remaining balance at higher frequency. - Establish a deposit facility and improve access to RBZ standby lending facility. ### Exchange restrictions and capital flow measures (Box 1) - Exchange restrictions subject to Fund approval under Article VIII arise from: 1. Rationing and allocation of foreign exchange by the RBZ, resulting in undue delays for FX for current international transactions. 2. A requirement for tax clearance certificates to access the WBWS market. 3. A cash margin requirement to access the WBWS market. 4. Limits on converting ZiG into FX for certain current international transactions, including for moderate family remittances, travel purposes, and dividends. 5. Direct limits on payments, including limits on remittances for moderate family living expenses. 6. 5 % administrative penalty fee on non-acquitted foreign payments for red-flagged importers before making payments for imports. 7. Restriction on payments under non-registered supplier credit agreements. - CFMs: - Surrender requirements were increased from 25 percent to 30 percent in February 2025. - This tightening gave rise to a tightening of a previously assessed CFM under the Institutional View (IV) on the Liberalization and Management of Capital Flows. - The tightening is considered not appropriate, as the implementation cannot be seen as temporary and is made without the necessary macroeconomic adjustments and should be removed as soon as conditions allow. ### Increasing usage of the ZiG and mono-currency transitional plan - Steps to increase ZiG usage: - Fiscal discipline and enhancements to monetary and FX frameworks to improve confidence. - Measures to enhance demand for ZiG, notably increasing the share of Treasury’s operations (revenues and expenditures) in ZiG. - Once fiscal conditions allow, remove the intermediated money transfer tax (IMTT) on electronic bank transfers, as ZiG transactions are disproportionately electronic. - Mono-currency transitional plan: - Additional clarity on operational implications needed to reduce uncertainty. - Authorities should clarify if mono-currency use will be limited to domestic transactions and whether bank deposits will remain denominated in both currencies. ### Financial sector oversight and banking sector measures - Staff welcomed progress with IMF technical assistance and highlighted outstanding priorities: - RBZ has adopted the Basel liquidity coverage ratio as a supervisory requirement and is finalizing the net stable funding ratio framework. - Authorities finalizing macroprudential, crisis preparedness and management, corporate governance, and cyber security frameworks. - Importance of implementing Basel III capital standard, including conservative definition of available capital and regulatory capital requirement. - RBZ should continue Asset Quality Review as it accumulates experience from the pilot. - Banks’ net open FX positions (NOP) remain high at almost 60 percent in December 2024. - RBZ recently directed banks to significantly reduce these positions to 10 percent (single currency) and 20 percent (all currencies) of capital. ### Authorities’ views on monetary and financial sector reforms - RBZ commitment to price stability and policy reforms: - Adopted communication in its monetary policy toolkit and clarified hierarchy of policy objectives and targets in line with staff advice. - Remain committed to maintaining tight monetary policy stance, enhanced by recent tightening of NNCDs redemption requirements. - Plan to move away from direct monetary policy tools and adopt indirect tools in medium to long term: - Introduce multiple tenors for NNCDs and remunerate them. - Introduce a Term Deposit Facility to enable use of interest rates as a monetary policy tool. - Forthcoming NDS2 will clarify operational implications for USD and ZiG bank deposits and policies on export surrender requirements in context of plans to transition to a mono-currency system by 2030. - RBZ reservations: - Questioned staff’s assessment that RBZ is a dominant player in the WBWS market and the need to re-direct surrender requirements to the market. - Argued re-direction would reduce scope for RBZ to intervene to stabilize rate and make building international reserve buffer more difficult. - Open to directing incremental surrender requirements (above current 30 percent) to the market and limiting interventions to smoothing excessive volatility when a more transparent interbank FX trading platform and other fundamentals are in place. - Requested IMF technical assistance in establishing an interbank trading system. - Disagreed with staff’s exchange restriction assessment, viewing many restrictions as desirable macroprudential policies and arguing unified FX guidelines had removed remaining de jure restrictions. ### Structural reforms to boost medium-term growth and governance - Importance of structural reforms once durable macroeconomic stability is restored: - Large structural gaps in multiple reform areas hold back growth potential. - Staff estimate: a package of first-generation reforms to close structural gaps in business regulation, labor market, external sector, and economic governance could boost output by between 5 to 10 percent over the medium term. - Additional credit market reforms could further increase output gains (Annex III). - Governance and anti-corruption: - IMF’s 2020 Governance and Corruption Assessment (GCA) identifies severe governance weaknesses and corruption vulnerabilities across fiscal governance, central bank governance, financial sector oversight, market regulations, rule of law and AML/CFT. - Significant shortcomings in anti-corruption legal and institutional frameworks and lack of transparency and accountability across public sector. - Progress in development of National Anti-Corruption Plan (NACP 2) focusing on accountability, transparency, and integrity; expected to be informed by IMF’s 2020 GCA and lessons from NACP 1. - Reforms to reduce corruption vulnerabilities should be accelerated. - Efforts to implement corruption prevention plan and operationalize an integrity committee within Mutapa are ongoing and should be expedited to strengthen governance frameworks, integrity and accountability for State-Owned Enterprises. *Source: 1zweea2025001-source-pdf - 18. To be sustainable, the adjustment must be accompanied by fiscal structural policies to* ### 38. Staff welcome recent progress on AML/CFT reforms. The establishment of an electronic ### Staff appraisal — Zimbabwe ### AML/CFT reforms - Establishment of an electronic register for beneficial ownership (BO) information and completion of the 2024 National Risk Assessment (NRA) on critical sectors are welcome. - The 2024 NRA identified the "medium low" money laundering threat facing the economy, while the institutional vulnerability in tackling such threat was rated at "medium high". - AML/CFT priorities going forward: - Expediting company registration on the BO register and sharing information with competent authorities, law enforcement agencies, and reporting entities. - Strengthening capacity building and law enforcement for ML/TF activities. - Stepping up efforts to identify politically exposed persons and implement related preventative measures. - Authorities’ planned actions: - Issue a legal instrument to establish a deadline for company registration on the BO register. - Use the 2024 NRA to inform Zimbabwe’s 2025-2029 AML/CFT Strategy, focusing on enhancing risk management, regulatory compliance, and institutional capacity. - The Financial Intelligence Unit plans to engage with development partners to build capacity at competent authorities and law enforcement agencies. - The Anti-Corruption Commission plans to develop an "anti-corruption preventive measures toolkit" to mitigate risks from SOEs, and to establish an integrity commission for Mutapa. - Note: Some critical sectors, such as banking, had not established designated AML functions by 2023, the data cut-off time for the NRA; recent enhancement in AML regulation should better position these sectors to address ML risks. ### Data issues and national accounts revisions - Data quality: Generally meets standards, yet significant issues remain regarding coverage and consistency. - CPI historically reflected a blended inflation measure, combining the U.S. dollar and local currency values. - Following the introduction of the new currency, CPI data based exclusively on ZIG prices has started to be reported and published as an analytical series, while the blended CPI continues to be compiled and disseminated as the headline inflation rate. - Monetary data are adequately covered in central bank surveys but should be expanded to fully cover other financial corporations and some FSIs are missing. - Authorities are transitioning to accrual-based fiscal reporting, but timely and accurate data on arrears are missing, and there are data gaps for state-owned enterprises (SOEs). - Persistent errors and omissions compromise the quality of external sector statistics; high turnover of staff negatively impacts the consistency of balance of payments compilation. - National accounts revisions: - Zimbabwe’s national accounts were revised to reflect the new currency introduced in early 2024 (the ZiG) and the 2024 Economic Census. - These revisions led to a large upward revision to the level of nominal GDP of about 26 and 40 percent in 2023 and 2024, respectively. ### Macroeconomic assessment and outlook - Recent stability: - A degree of macroeconomic stability has been maintained recently. - Tighter policies—notably the halting of quasi-fiscal operations and monetary financing by the central bank—have helped significantly reduce inflation and exchange rate pressures. - Growth projections: - Growth is expected to rebound to 6 percent this year, as extreme weather shocks have subsided, terms-of-trade have significantly improved, and remittances inflows remain robust. - Growth is expected to slow to 3.5 percent in the medium-term, as market confidence in the durability of macroeconomic stabilization remains limited, and fiscal financing needs continue to crowd out private sector credit and investment. - Inflation and risks: - Inflation is expected to remain low amid tight liquidity and reduced exchange rate pressures, but still subject to significant uncertainty emanating from potential fiscal pressures. - Significant challenges and downside risks persist: the parallel exchange rate premium remains elevated, the role of the ZiG in the economy is limited, and uncertainty about the path towards a mono-currency system is high. - Fiscal financing pressures remain unaddressed, with the authorities resorting to further accumulation of domestic arrears. - Reserve buffers are low; IMF staff assess the external position to be weaker than the level implied by fundamentals and desirable policies. - Without reforms to cement recent progress towards macroeconomic stability, the economy remains vulnerable as policy space to accommodate shocks is limited and policy reversals cannot be ruled out. ### Fiscal policy and public financial management recommendations - Staff recommend a comprehensive reform package to achieve long-lasting macroeconomic stability, centered on two pillars: - Addressing fiscal pressures and repairing structural weaknesses in the fiscal framework to secure fiscal discipline. - Enhancing the effectiveness and cohesiveness of Zimbabwe's monetary policy and foreign exchange framework. - Fiscal stance: - A tighter fiscal policy stance is needed to durably restore macroeconomic stability. - Given no access to external financing, limited options to further re-schedule debt, no definitive plans to sell assets, and no room for additional non-inflationary domestic borrowing or monetary financing, the current policy stance generates financing gaps likely to continue being met by further accumulation of domestic arrears. - Components of sustainable fiscal adjustment: - Include both revenues and spending measures and be accompanied by fiscal structural reforms. - Revenue priorities: Rationalizing generous CIT tax incentives, addressing tax avoidance and tax administration weaknesses. - Spending priorities: Adjusting spending, particularly on the employment cost, to support adjustment while creating room for targeted social spending. - Complementary measures: Better planning and stronger political commitment to prevent recurrence of arrears, and structural policies to strengthen public financial management. - Governance of Mutapa Investment Fund: - Strengthened governance framework remains key for controlling fiscal risks. - Priorities: Amend applicable legal provisions to clarify Mutapa’s mandate, integrate it into the budget process, and ensure adherence to highest standards of corporate accountability and transparency through appropriate oversight disclosure and publication of audited financial statements. ### Monetary and foreign exchange policy recommendations - Need for a more coherent monetary and exchange rate policy framework: - Despite tighter monetary policy alleviating some exchange rate pressures, important shortcomings remain: ambiguity about the nominal anchor, the WBWS exchange rate does not appear to fluctuate in response to market conditions, liquidity management through reserve requirement and NNCDs does not support monetary policy transmission, market development and demand for ZiG. - Staff recommendations to move to a more transparent market-based FX system and a more coherent monetary policy framework: - Clarify and better operationalize the monetary policy framework, with price stability as the primary objective, the exchange rate as the intermediate target, and money growth as the operational target. - Ensure that the exchange rate is market determined, including by reducing the RBZ’s FX market footprint and eliminating the exchange restrictions for current account transactions and CFMs as conditions allow. - Improve liquidity management and monetary control by replacing NNCDs with indirect and tradable securities, relaxing the daily fulfillment of reserve requirements and frequently releasing remaining balances, establishing a deposit facility, and improving access to the RBZ’s standby lending facility. - Complement these reforms with measures to enhance the demand for ZiG and to remove existing disincentives. - Additional clarity on the mono-currency transitional plan would help reduce uncertainty. ### Financial sector oversight and structural reforms - Financial sector oversight: - Authorities should build on recent progress towards strengthening financial sector oversight. - Staff underscore the importance of implementing Basel III capital standards, reducing banks’ net open FX positions, and expanding the RBZ’s Asset Quality Review beyond its pilot. - Structural and governance reforms to boost medium-term growth: - As durable macroeconomic stability is restored, concurrent structural and economic governance reforms will be crucial to boost medium-term growth and improve living standards. - Zimbabwe experiences large structural gaps in credit markets, business regulation, the labor market, the external sector, and economic governance. - A package of reforms to close structural gaps and address governance vulnerabilities could significantly increase Zimbabwe’s economic potential and is critical to boosting growth. ### Debt sustainability and next steps - Debt assessment: - Debt is assessed as unsustainable and in distress. - A policy track record could help Zimbabwe reengage with the international community to secure external arrears resolution, paving the way for new financing from multilateral and official bilateral creditors. - Article IV timing: - It is recommended that the next Article IV consultation with Zimbabwe be held on the standard 12-month cycle. *Source: IMF staff appraisal (excerpt provided in the content unit).* ### 55. The authorities did not request, and staff does not recommend, approval of the ### 1zweea2025001-source-pdf - 55 ### Output and prices - Real GDP growth (at constant 2019 prices): - 2022: 6.1 - 2023: 5.3 - 2024 (Act.): 1.7 - 2025 (Proj.): 6.0 - 2026 (Proj.): 4.6 - 2027 (Proj.): 3.6 - 2028 (Proj.): 3.5 - 2029 (Proj.): 3.5 - 2030 (Proj.): 3.5 - Nominal GDP (US$ millions): - 2022: 48,570 - 2023: 44,447 - 2024 (Act.): 45,719 - 2025 (Proj.): 49,584 - 2026 (Proj.): 51,560 - 2027 (Proj.): 53,441 - 2028 (Proj.): 55,308 - 2029 (Proj.): 57,218 - 2030 (Proj.): 59,237 - GDP deflator: - 2022: 274.5 - 2023: 768.6 - 2024 (Act.): 1,097.2 - 2025 (Proj.): 71.1 - 2026 (Proj.): 18.3 - 2027 (Proj.): 10.1 - 2028 (Proj.): 8.0 - 2029 (Proj.): 8.0 - 2030 (Proj.): 8.0 - CPI (annual average): - 2022: 193.4 - 2023: 667.4 - 2024 (Act.): 736.1 - 2025 (Proj.): 89.0 - 2026 (Proj.): 18.2 - 2027 (Proj.): 10.1 - 2028 (Proj.): 8.0 - 2029 (Proj.): 8.0 - 2030 (Proj.): 8.0 - CPI (end-of-period): - 2022: 243.8 - 2023: 778.8 - 2024 (Act.): 686.8 - 2025 (Proj.): 30.7 - 2026 (Proj.): 12.7 - 2027 (Proj.): 8.0 - 2028 (Proj.): 8.0 - 2029 (Proj.): 8.0 - 2030 (Proj.): 8.0 - Official exchange rate (ZWL per US$ until 2023, ZiG in 2024): - Annual Average Exchange Rate: 2022: 380.9; 2023: 3,516.2; 2024 (Act.): 16.7 - End-of-Period Exchange Rate: 2022: 681.7; 2023: 6,104.7; 2024 (Act.): 25.8 - Annual Average Exchange Rate, Year-on-year Percent Change: 328.9; 901.5; 999.6 (2022–2024 series) - End-of-Period Exchange Rate, Year-on-year Percent Change: 529.4; 791.4; 956.8 (2022–2024 series) ### Money and credit (selected levels and ratios) - Money supply (M2, US$ or ZiG depending on table): - 2022: 393.3 - 2023: 712.9 - 2024 (Act.): 930.8 - 2025–2030 (Projs.): 46.1, 30.6, 20.3, 18.0, 17.8, 17.3 (annual percentage change series presented) - Monetary base (levels / memorandum): - 2022: 300.2 - 2023: 1,842.7 - 2024 (Act.): 2,421.3 - Monetary base (annual percentage changes / memorandum): 0.6, 1.2, 2.5, 1.8, 1.9, 2.0, 2.1, 2.2, 2.3 (2022–2030 series in tables) - Credit to the private sector (levels and percent of GDP): - Levels (US$ millions, memorandum): 2022: 388.2; 2023: 914.1; 2024 (Act.): 1,070.4 - Percent of GDP (2022–2030): 5.9, 6.5, 6.3, 4.3, 4.0, 4.0, 3.9, 3.8, 3.7 - Money supply (in percent of GDP): - 2022: 12.6 - 2023: 11.2 - 2024 (Act.): 9.4 - 2025–2030 (Projs.): 7.6, 8.0, 8.5, 8.9, 9.4, 9.9 ### Reserve Bank of Zimbabwe / Monetary survey (ZiG millions, selected) - Reserve Bank of Zimbabwe net foreign assets (ZiG): - 2022: -1,113 - 2023: -9,094 - 2024 (Act.): -56,912 - 2025–2030 (Projs.): -48,348; -30,524; -5,127; 22,977; 51,024; 83,933 - Monetary base (ZiG): - 2022: 42 - 2023: 809 - 2024 (Act.): 20,395 - 2025–2030 (Projs.): 26,303; 34,560; 41,768; 49,523; 58,497; 68,871 - Banks: Deposits (ZiG): - 2022: 932 - 2023: 7,556 - 2024 (Act.): 78,649 - 2025–2030 (Projs.): 115,248; 150,391; 180,716; 213,047; 250,544; 293,391 - Monetary survey broad money (M3, ZiG): - 2022: 934 - 2023: 7,561 - 2024 (Act.): 78,763 - 2025–2030 (Projs.): 115,418; 150,646; 181,098; 213,620; 251,404; 294,681 - Memorandum items (selected annual percentage changes and ratios): - Nominal GDP growth (percent): 297.4; 814.9; 1,118.1; 81.4; 23.7; 14.1; 11.8; 11.8; 11.8 (2022–2030) - M2 (annual percent change): 12.6; 11.2; 9.4; 7.6; 8.0; 8.5; 8.9; 9.4; 9.9 (2022–2030) ### Central government operations (ZiG millions and percent of GDP) - Revenue (ZiG millions): - 2022: 8,237 - 2023: 7,838 - 2024 (Act.): 106,459 - 2025–2030 (Projs.): 219,199; 277,272; 318,736; 356,308; 398,202; 445,318 - Tax revenue (ZiG millions): - 2022: 7,837 - 2023: 7,653 - 2024 (Act.): 97,596 - 2025–2030 (Projs.): 205,344; 260,149; 299,192; 334,461; 373,787; 418,013 - Expenditure and net lending (ZiG millions): - 2022: 9,041 - 2023: 14,225 - 2024 (Act.): 109,674 - 2025–2030 (Projs.): 229,489; 283,985; 325,599; 365,040; 408,882; 458,465 - Overall balance (commitment, ZiG millions and percent of GDP): - Levels (ZiG millions): 2022: -81; 2023: -6,387; 2024 (Act.): -3,214; 2025–2030 (Projs.): -10,289; -6,713; -6,863; -8,733; -10,679; -13,147 - Percent of GDP: -1.1; -9.5; -0.4; -0.7; -0.4; -0.3; -0.4; -0.4; -0.4 - Primary balance (commitment, percent of GDP): - 2022: -0.9 - 2023: -9.2 - 2024 (Act.): 0.2 - 2025–2030 (Projs.): -0.1; 0.2; 0.3; 0.2; 0.2; 0.1 - Financing and arrears (selected): - Change in arrears (ZiG millions): 2022: 297; 2023: 721; 2024 (Act.): 9,025; 2025–2030 (Projs.): 34,180; 28,975; 25,996; 25,935; 27,268; 31,491 - Domestic change in arrears (ZiG millions): 2022: 84; 2023: 291; 2024 (Act.): 6,502; 2025–2030 (Projs.): 21,306; 18,622; 14,458; 15,549; 19,003; 24,043 - Foreign change in arrears (ZiG millions): 2022: 213; 2023: 432; 2024 (Act.): 2,523; 2025–2030 (Projs.): 12,874; 10,352; 11,538; 10,386; 8,265; 7,448 ### Balance of payments (US$ millions and percent of GDP) - Current account balance (US$ millions; percent of GDP): - 2022: 305 (0.6 percent of GDP) - 2023: 135 (0.3 percent of GDP) - 2024 (Act.): 501 (1.1 percent of GDP) - 2025–2030 (Projs.): 961 (1.9); 873 (1.7); 801 (1.5); 941 (1.7); 1,058 (1.8); 832 (1.4) - Exports of goods and services (US$ millions): - 2022: 7,453 - 2023: 7,603 - 2024 (Act.): 8,252 - 2025–2030 (Projs.): 9,159; 9,525; 9,833; 10,234; 10,632; 11,006 - Annual percentage change (exports): 13.4; 2.0; 8.5; 11.0; 4.0; 3.2; 4.1; 3.9; 3.5 - Imports of goods and services (US$ millions): - 2022: 9,569 - 2023: 10,293 - 2024 (Act.): 10,715 - 2025–2030 (Projs.): 10,888; 11,395; 11,826; 12,140; 12,409; 12,996 - Annual percentage change (imports): 18.1; 7.6; 4.1; 1.6; 4.7; 3.8; 2.7; 2.2; 4.7 - Reserve assets (US$ millions) and months of import cover: - Reserve assets: 2022: 597; 2023: 110; 2024 (Act.): 484; 2025–2030 (Projs.): 800; 1,144; 1,508; 1,933; 2,430; 2,938 - Months of import cover: 0.7; 0.1; 0.5; 0.9; 1.2; 1.5; 1.9; 2.4; 2.7 (2022–2030) ### Public debt (US$ millions and percent of GDP) - Consolidated public sector debt (US$ millions): - 2022: 18,016 - 2023: 21,077 - 2024 (Act.): 23,278 - 2025–2030 (Projs.): 23,665; 23,893; 24,126; 24,368; 24,616; 24,870 - Consolidated public sector debt (percent of GDP): - 2022: 66.8 - 2023: 76.1 - 2024 (Act.): 72.9 - 2025–2030 (Projs.): 49.5; 45.5; 43.5; 42.5; 41.5; 40.4 - Public and publicly guaranteed external debt (US$ millions and percent of GDP): - Levels (US$ millions): 2022: 16,327; 2023: 16,538; 2024 (Act.): 16,745; 2025–2030 (Projs.): 16,788; 16,739; 16,676; 16,629; 16,614; 16,585 - Percent of GDP: 60.5; 59.6; 52.5; 35.1; 31.9; 30.1; 29.0; 28.0; 27.0 - Arrears on public and publicly guaranteed external debt (US$ millions and percent of GDP): - Levels (US$ millions): 2022: 10,471; 2023: 10,770; 2024 (Act.): 11,909; 2025–2030 (Projs.): 12,506; 12,976; 13,457; 13,894; 14,268; 14,616 - Percent of GDP: 38.8; 38.8; 40.1; 28.1; 26.6; 26.1; 26.0; 25.8; 25.6 ### Financial soundness indicators (selected, Dec-2019 to Dec-2024) - Capital adequacy: - Regulatory capital to risk-weighted assets: Dec-2019: 33.4; Dec-2020: 29.8; Dec-2021: 26.3; Dec-2022: 30.2; Dec-2023: 29.6; Dec-2024: 29.4 - Percentage of banks ≥ 10 percent: 100.0 (Dec-2019 through Dec-2024) - Asset quality: - Past-due loans to gross loans (aggregate of special mention, substandard, doubtful, loss loans): Dec-2019: 18.3; Dec-2020: 33.8; Dec-2021: 41.6; Dec-2022: 38.3; Dec-2023: 35.9; Dec-2024: 32.5 - Nonperforming loans (past due > 90 days): Dec-2019: 1.8; Dec-2020: 0.3; Dec-2021: 0.9; Dec-2022: 1.7; Dec-2023: 2.1; Dec-2024: 3.4 - Provisions as percent of past-due loans: 18.0; 9.3; 11.6; 11.5; 12.6; 13.9 (Dec-2019 through Dec-2024) - Earnings and profitability: - Return on assets: Dec-2019: 12.8; Dec-2020: 10.1; Dec-2021: 9.6; Dec-2022: 15.1; Dec-2023: 19.4; Dec-2024: 19.0 - Return on equity: 62.9; 53.0; 50.0; 68.5; 75.8; 69.0 (Dec-2019 through Dec-2024) - Liquidity and sensitivity: - Liquid assets/total assets: 51.7; 53.0; 44.6; 44.7; 41.1; 33.7 (Dec-2019 through Dec-2024) - Loans/deposits: 38.4; 40.4; 49.1; 54.4; 59.4; 65.0 (Dec-2019 through Dec-2024) - Foreign exchange liabilities/total liabilities: 21.5; 35.1; 33.8; 43.0; 74.3; 82.6 (Dec-2019 through Dec-2024) - Net foreign exchange assets (liabilities) to shareholders' funds: -49.34; -141.44; -132.83; -134.48; 52.97; 57.97 (Dec-2019 through Dec-2024) *Sources: Zimbabwean authorities; IMF staff estimates and projections.* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### Overall assessment - The external position of Zimbabwe in 2024 was weaker than the level implied by medium-term fundamentals and desirable policies. - Key drivers of weakness: high level of external debt which is in distress, critically low foreign reserves, and large degree of REER overvaluation. - Introduction of ZiG in April 2024 and large depreciation of ZiG in September 2024 did not effectively address the previous real exchange rate disequilibrium. - Data shortcomings (C ratings for external sector statistics) increase uncertainty surrounding the ESA. - Potential policy responses: - Liberalize the FX market to provide relevant information for monetary policy stance and strengthen credibility of the ZiG. - Implement fiscal consolidation to improve the current account position. - Implement growth-friendly macroeconomic policies to strengthen the trade balance, anchor inflation expectations, build confidence to boost private capital inflows and shore up reserves, and strengthen external competitiveness. ### Foreign assets and liabilities: position and trajectory - Data coverage: Zimbabwe does not collect and publish the international investment position; monetary survey net foreign assets (NFA)-to-GDP ratio used as proxy. - Key figures: - NFA-to-GDP ratio in 2024: -4.1 percent (decreasing from a balanced position in 2022). - NFA-to-GDP projected to increase to 3.4 percent in 2029 with economic reforms and implementation of sound policies. - If public external debt is included for the NFA in the financial sector, NFA-to-GDP ratio in 2024: -40.7 percent. - Assessment: With improvement in the CA in the medium term, the net foreign asset position is projected to improve, but risks to external sustainability remain high. ### Current account - Background and recent dynamics: - Current account (CA) surplus increased to 1.1 percent of GDP in 2024, from 0.3 percent of GDP in 2023. - Drivers: strong growth in production and prices of key mining exports (gold), resilient worker remittances, and somewhat improved fiscal balance. - CA balance projected to be in surplus in 2025 due to high gold prices and strong remittances. - Medium-term outlook: CA surplus expected to gradually pick up due to acceleration in mining activities for lithium, recovery in gold production, and anticipated benefits of macroeconomic stabilization. - EBA-lite estimates and gaps (2024): - Adjusted current account balance: -0.4 percent of GDP. - Adjusted current account norm: 1.7 percent of GDP. - Adjustor to the CA norm: 0.3 percent of GDP (calculated as the product of the coefficient before NIIP in the regression of CA model and the difference between the NFA in the medium term under sound economic policies and the NFA in 2024 divided by the GDP in 2024). - Current account gap: -2.1 percent of GDP. - -3.3 percent of GDP of the gap is explained by policy gaps compared to trading partners, especially the cyclically adjusted fiscal balance and the change in reserves. - Assessment: Overall external debt position, external default and inadequate reserves, and consistently large errors and omissions indicating large capital flight corroborate that Zimbabwe’s external position is weaker than implied by fundamentals and desirable policies. ### Real exchange rate (REER) - Background: - Since introduction of ZiG in April 2024, the RBZ WBWS market exchange rate remained stable for several months. - WBWS rate depreciated by about 45 percent on September 27, 2024. - Cause: large increase of ZiG monetary base during April 2024—September 2024, widening the gap between WBWS exchange rate vis-à-vis the parallel rate from 25 percent to 100 percent. - In conjunction with the September devaluation, the MPC increased statutory reserve requirements for both ZiG and FX demand deposits from 15 and 20 percent, respectively, to 30 percent for both. - Policy rate was raised from 20 percent to 35 percent (limited impact on liquidity conditions). - WBWS and parallel exchange rates stabilized; low growth in the ZiG monetary base (adjusted for change in reserve requirements) suggests monetary policy stance remained tight. - Parallel premium has remained in the range of 20-30—indicating a persistent disequilibrium. - ZiG-based REER depreciated following nominal depreciation in 2024, but impact on competitiveness has been small given the limited role of the national currency in the economy. - Assessment: - Based on elasticity of -0.2, the CA gap implies an overvaluation of the real effective exchange rate by 13.6 percent. - Due to multiple changes in the currency regime and hyperinflation, constructing a reliable and consistent domestic price index relative to foreign countries is hard. - REER model data not available; not possible to assess Zimbabwe’s equilibrium exchange rate using the REER model. ### Capital and financial accounts: flows and policy measures - Background: - Capital flow measures (CFM) under the Institutional View remain in place: approval requirements for capital account transfers, surrender requirements (increased from 25 percent to 30 percent in February 2025), cash withdrawal and related outflow measures, limits on foreign investments, and limits on external borrowing. - In 2024, the financial account turned to net lending on the back of repayment of loans from commercial lenders. - Non-debt creating inflows (notably FDI) decreased relative to 2023 due to macroeconomic volatility and policy uncertainty. - Portfolio investments recorded lower net outflows in 2024. - Credibility dividends from economic reforms could potentially improve outlook for FDI and portfolio investments if regime is properly revised and implemented. - Assessment and policy guidance: - Encourage appropriate mix of policies to avoid disruptive capital outflows associated with broader economic instability. - Pursue comprehensive macroeconomic, financial, and structural policy package to allow for relaxation of CFMs, shore up reserves, and mitigate currency distortions, financial system stress and output losses. ### FX intervention and reserves level - Exchange rate regime classification: de jure floating and de facto other managed. - Central bank intervention: pervasive in 2024. - Long-standing capital control measures include an FX surrender requirement of 25 percent of export receipts (surrender requirement increased to 30 percent of export receipts in February 2025). - FX reserves: - FX reserves increased in the last months of 2024, reaching US$484 million by end-December (from US$179 million at the time of the introduction of the ZiG). - Assessment: - Gross international reserves remain significantly below adequate levels: inadequate to cover one month of imports as of end-2024. - Much lower than both the 3-months of imports rule-of-thumb and the model-based benchmark from the IMF toolkit for LICs, which suggests that 5.4 months of imports is the adequate level for Zimbabwe. - Given depleted reserves, FX management should be consistent with reserve accumulation goals under the new currency regime, while considering the dual currency system and seasonality of FX demand/supply. ### Risk Assessment Matrix — selected risks, likelihood, expected impact, policy responses - Conjunctural risks: - Trade policy and investment shocks - Likelihood: High - Expected impact: Medium. Higher trade barriers or sanctions reduce external trade, disrupt FDI and supply chains, and trigger further U.S. dollar appreciation, tighter financial conditions, and higher inflation. - Policy response: Push forward faster implementation of the AfCFTA; step-up structural reforms to attract FDI and improve competitiveness. - Tighter financial conditions and systemic instability - Likelihood: Medium - Expected impact: Medium. Higher-for-longer interest rates and term premia, looser financial regulation, rising investments in cryptocurrencies, and higher trade barriers trigger asset repricing, market dislocations, bank and NBFI distress, U.S. dollar appreciation, worsened debt affordability, and increased capital outflow from EMDEs. - Policy response: Step-up structural reforms; advance reforms to improve economic performance and gain international support to pave the way towards arrears clearance unlocking IFI financing. - Commodity price volatility - Likelihood: Medium - Expected impact: High. Volatility increases external and fiscal pressures, social discontent, and economic instability. - Policy response: Seek humanitarian support; create fiscal space for grain imports and improve targeting of social support systems; adjust monetary policy as needed. - Structural risks: - Deepening geoeconomic fragmentation - Likelihood: High - Expected impact: High. Leads to higher input costs, hindered green transition, and lower trade and potential growth. - Policy response: Push AfCFTA implementation; step-up structural reforms to create a stable, transparent business environment to attract FDI. - Climate change - Likelihood: Medium - Expected impact: High. Extreme climate events cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. - Policy response: Seek humanitarian support; create fiscal space for grain imports; rationalize agricultural support schemes to support long-term growth and resilience. - Domestic risks: - Fiscal policy slippages - Likelihood: High - Expected impact: High. Lack of adjustment to financing gaps and limited financing options could lead to monetary financing, FX pressures, and threats to price and financial stability. - Policy response: Take upfront measures to close financing gap; prepare credible contingency plan; improve revenue collection and streamline spending. - Slow reengagement from delays in advancing reforms - Likelihood: High - Expected impact: High. Delays would maintain status quo, exacerbating imbalances and worsening policy confidence. - Policy response: Advance reforms to gain international community support to pave the way for arrears clearance and unlock IFI financing. ### Structural reforms to boost economic potential - Context: - Despite robust recent growth, Zimbabwe’s economic performance lags peers; output growth averaged around 2 percent in the past decade, insufficient to significantly raise living standards. - GDP per capita remains below the LIC average; potential growth lags regional peers. - Persistent structural challenges: trade and financial openness, market de-regulation and bureaucratic procedures, credit market regulations, hiring and firing flexibility, and overall economic governance. - Reform impact estimates: - Focus: first-generation reforms to close 25 percent of Zimbabwe’s structural gaps relative to the LIC frontier, targeting business regulation, the external sector, credit markets, and economic governance. - Methodology: local projection method (Jordà, 2005) controlling for other factors; data for around 50 LICs and nearly 80 EMEs over 2000–20. - Results: - Closing 25 percent of 2022 first-generation structural gaps could boost output by up to 6.7 percent in the short run and up to 11.8 percent over the medium term. - Including credit reforms yields an additional 2.7 percent boost. ### Data issues - Data adequacy and quality: - C ratings for external sector statistics (Annex IV) increase uncertainty surrounding assessments. - Table 1: Data adequacy assessment rating heatmap entries include combinations of letters such as BCCCCCC and other sectoral ratings; inter-sectoral consistency and granularity considerations noted. - The data provided to the Fund is adequate for surveillance; the data provided to the Fund has some shortcomings but is broadly adequate for surveillance. - Zimbabwe participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes data on its National Summary Data Page since March 2023. *Source: Annex I. External Sector Assessment, 1zweea2025001-source-pdf - Annex I. External Sector Assessment* ### 1. Zimbabwe: Data Adequacy Assessment for Surveillance ### 1. Zimbabwe: Data Adequacy Assessment for Surveillance ### Use of data in Article IV consultations and immediate data issues - During the mission revised GDP estimates were submitted. The revised estimates were used in the article IV consultation discussions. - The authorities have also started providing CPI in the local currency for the recently introduced ZiG. - During the mission revised GDP estimates were submitted. These will only be used once they have officially been disseminated. - To ensure the data have a consistent time series, the IMF Statistics Department (STA) stands ready to assist authorities to review the compiled data based on the new currency introduced in April 2024. ### Changes since the last Article IV consultation - Timeliness and frequency across all the macro statistics has improved compared to the previous Article IV consultation. - New revised GDP estimates were provided during the mission based on National Economic Census (NEC) which was carried out for 2023 and with support from STA. - The revised estimates were published at the end of June. (Elsewhere noted: the revised estimates will be published at the end of June.) - There have also been some improvements in the monetary statistics such as including ZiG/FX currency split to some (but not all) of the monetary survey categories. ### Other data gaps and quality shortcomings - Until the introduction of the new currency, while CPI data is consistently provided, it was a measure of blended inflation - a mix of US dollar and Zimbabwe dollar inflation - instead of pure Zimbabwe inflation. - After the introduction of the new currency, CPI data based on only ZiG prices has started to be reported and published as an analytical series. The blended CPI continues to be compiled and disseminated as the headline inflation rate for Zimbabwe. - Monetary data provides sufficient coverage in the central bank and other depository surveys but could provide additional coverage to other financial corporations given their significance in Zimbabwe (TA by STA in 2023). - The authorities could compile and publish missing FSI data which are based on the 2019 FSI Guide methodology. - Reflecting transactions outside PFMS, lack of data for SOEs, absence of details for legacy debt, fiscal risks from SOEs are large and have a high probability of materialization. - There are large and persistent errors and omissions which undermine the data quality for external sector statistics. - Gaps in the IIP and financial account, and the loss of experienced staff affects the consistency of the BoP compilation. ### Staff assessment summary and rationale - The data provided to the Fund is adequate for surveillance. (Heatmap and questionnaire assessments indicate mixed ratings; median rating reported as B in one table.) - Rationale: While the quality of data provided is usually sufficient, there are issues with coverage and consistency; timeliness and frequency have improved in recent months. - Specific shortcomings noted that somewhat or significantly hamper surveillance include coverage gaps (FSI, other financial corporations), SOE data and fiscal risks, legacy debt details, large errors and omissions in external statistics, and BoP compilation consistency issues. ### Corrective actions and capacity development priorities - Recent CD provided by STA in National accounts helped the authorities to produce revised GDP estimates. - Additional support will be provided in rebasing their GDP. - Support was provided for the coordinator in data standards to enable him to submit the required data on the available platform. - CD is planned within this year in the areas of wage bill management, SOE risk profiling and monitoring, Government Finance statistics and Public sector debt statistics to help the authorities address PFM issues. - STA stands ready to assist authorities to review compiled data based on the new currency introduced in April 2024. ### Data Standards and dissemination - Zimbabwe participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes the data on its National Summary Data Page since March 2023. - Table of Common Indicators Required for Surveillance (as of July 22, 2025) shows mixed data quality characteristics across domains (coverage, consistency, frequency and timeliness, granularity). --- ### Debt sustainability and related background (DSA summary) - Zimbabwe’s debt remains unsustainable and assessed to be in “external and overall debt distress”. - Zimbabwe has a Composite Indicator (CI) score of 2.06 based on the April 2025 WEO and the World Bank’s 2023 CPIA data vintages. This corresponds to a “weak” debt carrying capacity for Zimbabwe, which is the same classification as under the previous DSA. - Risk of external debt distress: In debt distress. - Overall risk of debt distress: In debt distress. - Granularity in the risk rating: Unsustainable. - Application of judgement: No. ### Key debt statistics (background on debt) - Zimbabwe’s public and publicly guaranteed (PPG) debt stood at 72.9 percent of GDP at end-2024. - The total debt stock reached US$23.3 billion at end-2024 up from US$21.2 billion at end-2023. - The increase was primarily driven by: - the inclusion of the outstanding stock of the SDR allocation equivalent to US$870 million on-lent from the RBZ to the Treasury used to meet financing needs during 2021-24, and - the accumulation of domestic arrears amounting to US$1.1 billion, reflecting previously unreported outstanding stock that the authorities certified in the context of preparing a repayment plan. ### Policy implications and recommended sequencing for restoring debt sustainability - Restoring debt sustainability requires: - fiscal discipline that restrains further accumulation of debt; - transparently embarking on a credible plan to clear arrears to multilateral creditors; and - reaching an agreement with bilateral official and other creditors on a comprehensive treatment of Zimbabwe’s external debt. - Sustained implementation of sound macroeconomic policies, growth-friendly monetary and fiscal policy reforms, along with governance and structural reforms that focus on improving Zimbabwe’s competitiveness, will help restore macroeconomic stability, set the stage for sustainable long-term growth, and build a policy track record required for debt relief. *Source: IMF staff report material in "1. Zimbabwe: Data Adequacy Assessment for Surveillance" and associated DSA background (pages and tables as provided).* ### 2. Zimbabwe has been accumulating external arrears to its creditors since the early ### 2. Zimbabwe has been accumulating external arrears to its creditors since the early 2000s, now estimated at US$7.4 billion ### External arrears and creditor composition - Total external arrears estimated at US$7.4 billion. - Arrears composition: - Paris Club creditors: 53 percent of external arrears. - Multilateral creditors: 35 percent of external arrears. - Non-Paris Club creditors: around 11 percent of external arrears. - Specific multilateral arrears (by end-2024): - World Bank: US$1.5 billion. - African Development Bank: US$657 million. - European Investment Bank: US$418 million. - Arrears to commercial creditors: US$47.4 million at the end of 2024. - Token payments and engagement: - Token payments resumed in 2021. - US$50.6 million token payments to multilateral creditors, Paris Club creditors, China, and other creditors in 2024. - High-level Structured Dialogue Platform established to engage donors and creditors and seek debt relief. ### Composition of public external debt and major creditors - Public debt concentration in official sector creditors: - Official bilateral creditors: 37 percent of total public external debt. - Multilateral creditors: 16 percent of total public external debt. - Outstanding bilateral debt: US$6.2 billion. - Paris Club creditors: 65 percent of bilateral outstanding (almost all debt to 16 Paris Club creditors—98 percent—in arrears). - Non-Paris Club creditors (primarily China): outstanding obligation plus arrears around US$2 billion (largest single creditor). - Commercial creditors and legacy elements: - Commercial creditors (notably Afreximbank) and legacy debt account for the balance. - Some external loans collateralized on proceeds from mineral exports. ### Domestic public debt accumulation and financial sector implications - Domestic debt share rose from 9 percent in 2022 to 28 percent in 2024. - Drivers: - Substantial US$2.85 billion treasury bond issuance in 2023 used to on-lend for asset purchases to the Mutapa Investment Fund and to settle past US$ commitments of the RBZ. - Concentration risks: - Bonds issued in 2023 concentrated among domestic banks and a single major private asset manager; minimal participation by pensions funds, insurance companies, and the social security fund. - Raises concerns about a high banks‑sovereign nexus and crowding out private sector lending and real investments. - Financing characteristics: - Continued reliance on high-cost, short-term domestic financing. - Government partially reprofiled domestic debt obligations, temporarily suspending servicing treasury bonds related to blocked funds, RBZ, Fidelity Gold Refinery and RBZ printing and minting. - Accumulation of arrears to suppliers; nearly US$600 million in domestic expenditure arrears in 2024. ### Text Table 1: Key public and publicly guaranteed debt figures (US$ millions; as of end-2024) - Total public debt: - DOD: 13,552 - Arrears and Penalties: 9,642 - Total: 23,194 - % of GDP: 78.1 - % of Total: 100 - External (total): - DOD: 8,336 - Arrears and Penalties: 8,409 - Total: 16,745 - % of GDP: 56.4 - % of Total: 72.2 - Multilateral creditors (total): - DOD: 162.4 - Arrears and Penalties: 2,598.9 - Total: 2,761.2 - % of GDP: 9.3 - % of Total: 11.9 - World Bank (IBRD + IDA): DOD 83.0; Arrears 1,503.2; Total 1,586.2; % of GDP 5.3; % of Total 6.8 - AfDB (ADB + ADF): DOD 19.5; Arrears 656.9; Total 676.4; % of GDP 2.3; % of Total 2.9 - EIB: DOD 6.8; Arrears 418.4; Total 425.3; % of GDP 1.4; % of Total 1.8 - Bilateral creditors (total): - DOD: 1,450.7 - Arrears and Penalties: 4,758.7 - Total: 6,209.4 - % of GDP: 20.9 - % of Total: 26.8 - Paris Club: DOD 54.8; Arrears 3,952.2; Total 4,007.0; % of GDP 13.5; % of Total 17.3 - Germany: DOD 28.4; Arrears 951.8; Total 980.2; % of GDP 3.3; % of Total 4.2 - France: DOD 1.2; Arrears 843.6; Total 844.8; % of GDP 2.8; % of Total 3.6 - United Kingdom: DOD 0.0; Arrears 459.2; Total 459.2; % of GDP 1.5; % of Total 2.0 - Non-Paris Club: DOD 1,395.8; Arrears 806.5; Total 2,202.4; % of GDP 7.4; % of Total 9.5 - China: DOD 1,319.2; Arrears 773.8; Total 2,093.0; % of GDP 7.1; % of Total 9.0 - India: DOD 73.8; Arrears 8.1; Total 81.9; % of GDP 0.3; % of Total 0.4 - South Africa: DOD 0.0; Arrears 24.4; Total 24.4; % of GDP 0.1; % of Total 0.1 - Commercial creditors (total): - DOD 991.0; Arrears 1,051.4; Total 2,042.4; % of GDP 6.9; % of Total 8.8 - Afrexim: DOD 300.0; Arrears 1,045.4; Total 1,345.4; % of GDP 4.5; % of Total 5.8 - TDB/PTA: DOD 691.0; Arrears 6.0; Total 697.0; % of GDP 2.3; % of Total 3.0 - Legacy debt (total): - DOD 5,732.0; Arrears 0.0; Total 5,732.0; % of GDP 19.3; % of Total 24.7 - Former farm owners: 3,500.0 (11.8 percent of GDP; 15.1 percent of total) - RBZ Debt: 2,232.0 (7.5 percent of GDP; 9.6 percent of total) - Assumed by Treasury: 2,232.0 (7.5 percent of GDP; 9.6 percent of total) - Afreximbank: 1,010.7 (3.4 percent of GDP; 4.4 percent of total) - Others (outstanding blocked funds): 0.0 DOD; 0.0 Arrears; Total 0.0 (memo: authorities report 1,503.0 in another classification) - Domestic debt (total): - DOD 5,216.5; Arrears 1,232.8; Total 6,449.3; % of GDP 21.7; % of Total 27.8 - T-Bills: DOD 195.5; Arrears 139.3; Total 334.8; % of GDP 1.1; % of Total 1.4 - T. Bonds: DOD 5,021.0; Arrears 9.9; Total 5,030.8; % of GDP 16.9; % of Total 21.7 - Issued for Blocked Funds: 1,896.6; % of GDP 6.4; % of Total 8.2 - Other issuances: 3,124.4; % of GDP 10.5; % of Total 13.5 - Arrears to service providers: Arrears and Penalties 1,083.7; Total 1,083.7; % of GDP 3.7; % of Total 4.7 - Collateralized debt (memo): 1,310.7; % of GDP 4.4; % of Total 5.7 - Nominal GDP: 45,718.8 (end-2023) and 44,446.6 (end-2024) reported in table. - ZWL$ per US$ (eop): 25.8 (end-2023), 2.4 (end-2024) in table. - ZWL$ per US$ (avg): 16.7 (end-2023), 1.5 (end-2024) in table. - Note: US$ millions; as of end-2024. Sources: Zimbabwe Public Debt Management Office and IMF staff estimates. ### Legacy liabilities and regularization efforts - Three major legacy debt sources: - RBZ quasi-fiscal operations/QFO-related borrowing: - Regularization via transfer to the Treasury amounted to about 5 percent of GDP in assumed debt. - External FX liabilities (e.g., consolidated Afreximbank loans on‑lent to the treasury by the RBZ) transferred to the fiscus. - Cost of servicing QFO-related debt and additional T-bonds issued to on-lend to the Mutapa Investment Fund has deepened the debt burden. - Global Compensation Deed (former farm owners): - Agreement in July 2020 for global compensation of US$3.5 billion for land improvements. - About one-third (1,300) of former farm owners negotiating individual agreements for compensation via US$ Treasury bonds (2 to 10 years). - In April 2025, Zimbabwe paid US$3.1 million (allocated from the 2025 budget) to a “first batch” of 378 farms. - Remainder of US$311 million due to this group to be paid in US$ treasury bonds with 2- to 10-year maturities and interest of 2 percent. - Blocked funds from 2019 currency reform: - RBZ announced compensation estimate of US$3.8 billion for losses on cash flows that could not be repatriated. - Transfer approved by Parliament in December 2021 after verifications. - Treasury bonds issued to blocked funds claimants currently around US$1.9 billion, including April 2024 issuances to regularize obligations with the Trade and Development Bank (TDB) totaling US$691 million. - Outstanding unfunded liability of about US$800 million for blocked funds for which no bonds have been issued nor credible plan provided (discussions to restructure some ongoing). - Payments made via combination of cash payments and redemption/discounting of zero-coupon bonds with maturity ranging from 3 to 20 years. ### Reengagement, debt treatment, and constraints - Due to arrears to bilateral and multilateral creditors, Zimbabwe has limited access to official financing. - Reengagement and comprehensive debt treatment required to restore debt sustainability. - Authorities engaged financial and legal advisors to prepare updated debt restructuring strategy and assist in discussions with creditors on reprofiling debt obligations. - International creditor community conditions: - Need for economic reforms (to be assessed through successful completion of Staff Monitored Program(s) with the IMF) and political-governance reforms. - Resolution of land reform compensation issues listed as a precondition for reengagement by key creditor groups. ### Debt coverage and contingent liability stress tests - Public debt coverage includes public and publicly guaranteed (PPG) debt of central government, central bank, and some SOEs. - Two legacy debt sources (blocked funds without issued bonds and Global Compensation Deed) are recorded under external debt stock in the DSA because they are denominated in U.S. dollars and lack clear financing sources and residency information. - Combined contingent liability stress test components (to reflect additional liabilities not captured in baseline): - 1 percent of GDP: elements of general government debt not directly included in the debt stock (including low recovery rates on guarantees to the agricultural sector). - 2 percent of GDP: default shock to cover risks from unaccounted SOEs debt. - 4.1 percent of GDP: default public-private partnership shock (based on the World Bank's PPP database). - Total equivalent: 12.1 percent of GDP (to account for risks from other unaccounted elements of public sector debt, SOE debt, PPPs, and financial market risks). - 5 percent of GDP: capture risks from the financial sector (pre-defined default calibration). - Coverage table notes: - Central government: covered. - Guarantees (to other entities): covered. - Central bank (borrowed on behalf of government): covered. - State and local government, other elements in general government, non-guaranteed SOE debt: not covered or improving but remain concerns. ### Macro background and baseline forecasts used in the DSA - Recent macro performance: - Real GDP growth: 5.3 percent in 2023; 2 percent in 2024. - Drivers of 2024 slowdown: 15 percent drop in agricultural output from drought, reduced electricity production, and weaker platinum and lithium prices. - Domestic expenditure arrears: nearly US$600 million in 2024. - Monetary developments: - Loose liquidity and rapid expansion of ZiG monetary base led to sharp drop in ZiG value in September 2024. - RBZ tightened policies: halted monetary financing, raised reserve requirements and policy rates, restricted NNCD liquidations. - Monthly inflation reduced to 0.3 percent by June 2025. - Parallel exchange rate premium around 30 percent. - DSA macro framework and assumptions: - DSA based on revised official GDP figures published in June 2025 following an economic census by the Zimbabwe National Statistics Agency; revision significantly upwardly revised nominal GDP levels from 2019 onward. - Impact of GDP revision: - Using previous GDP series (end-2024), ratios would have been: total PPG debt 101.8 percent of GDP; external debt 73.2 percent of GDP; domestic debt 28.6 percent of GDP. - Under updated GDP series (end-2024): total PPG debt 72.9 percent of GDP; external debt 52.5 percent of GDP; domestic debt 20.5 percent of GDP. - Projections assume RBZ commitment to stabilizing ZiG, contributing to relatively low and stable inflation and moderate re-monetization. - Without decisive fiscal adjustment, pressures persist, resulting in continued domestic and external arrears accumulation (added to debt stock). - Growth projections broadly similar to previous DSA; potential growth at 3.5 percent (Text Figure 1). - Current account balance estimated at 1.1 percent of GDP in 2024 and projected to fluctuate with a surplus between 1 and 2 percent of GDP over the medium term. - Primary fiscal balance projected to improve gradually; revenues projected to rise while expenditure broadly stable (text cut off after this point in the source). *Source: IMF staff estimates and Zimbabwe authorities (excerpts from the DSA chapter).* ### 12.9 percent of GDP in 2024 to 14.7 percent of GDP in 2025 before stabilizing at around ### 1zweea2025001-source-pdf - 12.9 percent of GDP in 2024 to 14.7 percent of GDP in 2025 before stabilizing at around ### Macroeconomic framework (selected projections and indicators) - Real GDP (growth) — Current DSA: 2022: 6.1; 2023: 5.3; 2024: 1.7; 2025: 6.0; 2026: 4.6; 2027: 3.6; 2028: 3.5; 2029: 3.5; 2030: 3.5. - Inflation, average (percent) — Current DSA: 2022: 193.4; 2023: 667.4; 2024: 736.1; 2025: 89.0; 2026: 18.2; 2027: 10.1; 2028: 8.0; 2029: 8.0; 2030: 8.0. - Inflation, e.o.p. (percent) — Current DSA: 2022: 243.8; 2023: 778.8; 2024: 686.8; 2025: 30.7; 2026: 12.7; 2027: 8.0; 2028: 8.0; 2029: 8.0; 2030: 8.0. - Primary balance, based on DSA (percent of GDP) — Current DSA: 2022: -0.9; 2023: -9.2; 2024: 0.2; 2025: -0.1; 2026: 0.2; 2027: 0.3; 2028: 0.2; 2029: 0.2; 2030: 0.1. - Revenues and grants (percent of GDP) — Current DSA: 2022: 11.1; 2023: 11.6; 2024: 12.9; 2025: 14.7; 2026: 15.0; 2027: 15.1; 2028: 15.1; 2029: 15.1; 2030: 15.1. - Current account (percent of GDP) — Current DSA: 2022: 0.6; 2023: 0.3; 2024: 1.1; 2025: 1.9; 2026: 1.7; 2027: 1.5; 2028: 1.7; 2029: 1.8; 2030: 1.4. - Non-interest current account (percent of GDP) — Current DSA: 2022: 1.4; 2023: 1.2; 2024: 1.8; 2025: 4.1; 2026: 4.5; 2027: 4.5; 2028: 4.6; 2029: 4.5; 2030: 4.0. - Exports of goods and services (growth) — Current DSA: 2022: 13.4; 2023: 2.0; 2024: 8.5; 2025: 19.5; 2026: 8.2; 2027: 4.4; 2028: 3.4; 2029: 2.8; 2030: 3.0. - FDI (percent of GDP) — Current DSA: 2022: 0.7; 2023: 1.4; 2024: 1.0; 2025: 0.9; 2026: 0.9; 2027: 0.9; 2028: 0.9; 2029: 0.9; 2030: 0.9. - Reserves (months of imports) — Current DSA: 2022: 0.7; 2023: 0.1; 2024: 0.5; 2025: 0.9; 2026: 1.2; 2027: 1.5; 2028: 1.9; 2029: 2.4; 2030: 2.7. ### Debt dynamics and projections - Domestic debt path: - Domestic debt declines from 20.5 percent of GDP in 2024 to 14.4 percent of GDP in 2025, then gradually to 12 percent by 2035 (driven by higher GDP levels despite nominal increases). - Under the previous GDP series, domestic debt would have remained above the peers’ median benchmark of 17.2 percent of GDP over the medium term. - Domestic debt service capacity: - The domestic debt service-to-revenue ratio (including grants) is projected to rise through 2031, crossing above the peers’ median benchmark of 22 percent by 2030 before declining thereafter, indicating worsening government debt servicing capacity over that period. ### Financing assumptions and market access - External debt service financing assumptions: - Most external debt service is assumed financed through: (i) further arrears accumulation (except token payments to IFIs, Paris Club creditors, China and India); (ii) loans with BADEA, Kuwait, IFAD and OPEC Fund (small portion relative to arrears); and (iii) collateralized part of external commercial borrowing. - Domestic financing assumptions: - Domestic financial markets are the primary source of budget financing given constrained external access. - Assumes US$-denominated domestic bonds related to blocked funds, RBZ, Fidelity Gold Refinery and RBZ printing and minting are not serviced for two years as part of partial reprofiling but are rolled over at maturity afterwards. - Budget deficit financing through disbursement of an existing external loan of US$30.4 million from Kuwait, IFAD, and the OPEC Fund, and domestic debt market. - Residual financing needs met by accumulation of domestic arrears and domestic market financing, with 30 percent denominated in ZiG and the balance in USD. ### Risks to the baseline and stress testing - Risk factors (tilted to the downside): - Limited policy space to respond to commodity price volatility, geoeconomic fragmentation, climate change. - Adverse climatic shocks could slow energy and agricultural production. - New fiscal risks from Mutapa Investment Fund activities, bailing out and recapitalizing ailing SOEs, and unsustainable budgetary and quasi-fiscal spending. - Upside possibilities: - Expansion of mining capacity and exports with favorable commodity prices. - Successful reengagement with international community, arrears clearance, debt treatment, liberalization of the exchange rate reversing informality and attracting private external financing. - Stress test design: - Standard stress tests: real GDP growth, primary balance, exports, current transfers, FX depreciation (nominal depreciation of 30 percent in first year), and combination shock (half magnitude of individual shocks in second or third years). - Two tailored tests: contingent liability stress test and commodity price shock. - In the external DSA stress tests, additional financing needs assumed covered by PPG external medium- and long-term debt; in public DSA, 30 percent of additional needs met by external medium- and long-term borrowing and remainder by domestic market issuances (ZiG and USD to resident holders). - Note: Zimbabwe’s external financing sources are quite limited; absence of reengagement and debt relief may prevent full coverage of gross financing needs. ### Debt sustainability assessment - Debt carrying capacity: - Composite indicator score improved to 2.06 from 1.87 in previous vintage; classification remains "Weak". - Applicable indicative thresholds for weak capacity applied: TOTAL public debt benchmark — PV of debt in % of GDP: 35; PV of total public debt in percent of exports: 140; PV of total public debt in percent of GDP (alternate listing): 30; Debt service in % of exports: 10; Debt service in % of revenue: 14. - External DSA conclusions: - External debt is assessed to be in distress and unsustainable. - PV of external debt-to-GDP in baseline exceeds the indicative threshold of 30 percent until 2028. - External debt-to-export ratios exceed the indicative threshold of 140 percent until 2030. - Protracted accrual of substantial arrears and use of exceptional financing via arrears accumulation render the debt position unsustainable. - Treatment of arrears (capitalized to stock but not added to debt service) underestimates PV and liquidity indicators relative to a scenario without further arrears accumulation. - Standard stress tests show debt burden indicators exceed thresholds throughout the forecast horizon; combined contingent liabilities and primary balance shocks are most severe. - Fiscal consolidation and macro stabilization alone would be insufficient; a comprehensive debt relief package would be needed to restore sustainability. - Public DSA conclusions: - Overall public debt assessed to be in distress and unsustainable. - PV of overall public debt projected to remain above the 35 percent benchmark for countries with weak debt carrying capacity until at least 2034. - Total public debt remains elevated with protracted arrears accumulation. - Liquidity indicator (debt service-to-revenue) is elevated due to high-cost, short-term domestic refinancing reliance. - Stress tests imply PV of debt-to-GDP and PV of debt-to-revenue and debt service-to-revenue ratios would remain higher under shocks, especially growth and commodity price shocks. ### Restoring debt sustainability: findings and required actions - Required mix to restore sustainability: - Balanced mix of fiscal consolidation, strengthened public debt management, growth-promoting structural reforms, and external arrears resolution to enable new financing from multilateral creditors and bilateral contributions. - Recent progress and preparatory steps: - Authorities’ Structured Dialogue Platform (set up in 2022) continues technical-level creditor engagement on economic and political reforms required for reengagement. - Authorities engaged financial and legal advisors to develop arrears clearance and debt resolution strategy and facilitate creditor discussions. - Roadmap to clearing arrears to IFIs (World Bank, African Development Bank, European Investment Bank) identified as essential; likely need supported by a bridge loan. - Ongoing discussions on a potential bridge loan; creditors have called for an IMF Staff Monitored Program (SMP) before engaging on such financing. - Authorities’ program for SMP would need broad alignment with Article IV and capacity development advice. - Discussions initiated with key commercial creditors on debt payments moratoria. - Successful debt resolution requires reconciliation of Zimbabwe's debt and establishment of clear restructuring parameters. - Eligibility and frameworks: - Unclear whether Zimbabwe is eligible for G20 Common Framework or HIPC Initiative due to protracted arrears to multilateral creditors and, for HIPC, income exceeding end-2004 and end-2010 IDA eligibility criteria. - Official creditors may provide ad hoc treatments (examples cited in other cases) consistent with restoring debt sustainability. ### Conclusion and fiscal governance risks - Key conclusion: - Zimbabwe’s debt remains unsustainable and assessed to be in “external and overall debt distress”. - Most external and total public debt indicators breach indicative thresholds in both baseline and shock scenarios throughout the medium term. - Constraining factors: - Significant arrears to multilateral and official bilateral creditors and difficulties reprofiling collateralized external commercial loans impede resumption of official financing and market access. - Domestic debt increasing as share of GDP due to local financing even as external borrowing is constrained. - Legacy debt and unfunded liabilities (including compensation agreement for displaced farmers) exacerbate debt overhang. - Quasi-fiscal obligations (some transferred from RBZ to treasury) and potential contingent liabilities pose additional fiscal risks. - Governance imperatives: - Clearing accumulated arrears to multilateral creditors and agreeing with other creditors on comprehensive treatment of external debt are prerequisites for restoring debt sustainability. - Strengthening governance of the Mutapa Investment Fund and controlling fiscal risks are emphasized. - Continuous implementation of sound macroeconomic policies and growth-friendly monetary, fiscal, and structural reforms to improve competitiveness and build a track record for debt relief. *Source: Zimbabwe — IMF staff estimates and projections as presented in the provided content unit.* ### 25. The authorities broadly concurred with staff’s assessment that public and external ### 1zweea2025001-source-pdf - 25. The authorities broadly concurred with staff’s assessment that public and external ### Authorities' assessment and policy stance - The authorities broadly concurred with staff’s assessment that public and external debt remain unsustainable and in distress. - Given constrained access to concessional financing, the authorities emphasized the necessity of relying on non-concessional commercial borrowing and the domestic market, despite unfavorable terms. - They expressed satisfaction with the implementation of the Public Debt Management Act, noting that all borrowing, including by the Mutapa Investment Fund, is subject to oversight by the External and Domestic Debt Management Committee. - Progress on legacy debt includes treasury bonds issued to settle blocked funds and ongoing discussions to restructure remaining obligations. - The Structured Dialogue Platform is highlighted by the authorities as a central pillar of Zimbabwe's Arrears Clearance, Debt Relief and Restructuring Strategy, viewed as a transparent and inclusive process focusing on: - economic growth, - governance reforms, - land tenure issues, - compensation for former farm owners. - The authorities reiterated commitment to reforms and underscored the importance of a successful SMP in restoring access to external financing and achieving national development goals. ### Key external debt indicators (Baseline Scenario, selected series) - External debt (nominal) 2022–2044 (In percent of GDP): 77.4,76.5,66.9,45.4,41.8,39.7,38.7,37.6,36.4,33.0,27.7,56.5,37.4 - of which: public and publicly guaranteed (PPG) 2022–2044 (In percent of GDP): 60.5,59.7,52.5,35.1,31.9,30.1,29.0,28.0,27.0,24.1,19.6,41.8,27.9 - Change in external debt (In percent of GDP): 26.8,-1.0,-9.5,-21.6,-3.6,-2.0,-1.1,-1.1,-1.1,-0.7,-0.5 - Identified net debt-creating flows (In percent of GDP): 2.7,5.5,-4.2,-6.6,-4.6,-3.9,-4.0,-4.1,-3.6,-3.4,-3.0,-3.3,-4.1 - Residual (In percent of GDP): 24.1,-6.5,-5.3,-15.0,1.0,1.9,2.9,3.0,2.5,2.8,2.5,6.3,1.0 - PV of PPG external debt-to-GDP ratio (selected years): 37.7,34.1,32.2,30.4,28.8,27.4,25.9,23.3,19.1 - PV of PPG external debt-to-exports ratio (selected years): 209.1,184.7,174.5,165.3,155.6,147.5,139.6,130.3,113.4 - PPG debt service-to-exports ratio (selected years): 6.9,9.7,7.6,8.3,6.7,6.6,5.6,4.4,4.1,0.7,0.1 - Gross external financing need (Million of U.S. dollars, selected years): 2,886.1,2,626.1,2,450.0,2,048.5,2,178.0,2,355.5,2,125.2,1,911.4,2,028.1,1,107.5,24.9 ### Key macroeconomic assumptions used in DSA (selected series) - Real GDP growth (in percent) 2022–2044 (selected): 6.1,5.3,1.7,6.0,4.6,3.6,3.5,3.5,3.5,3.5,3.4,2.0,3.8 - GDP deflator in US dollar terms (change in percent): -12.7,-13.1,1.1,2.3,-0.5,0.0,0.0,0.0,0.0,0.0,0.0,8.4,0.2 - Effective interest rate (percent) 1/ : 1.3,1.0,1.0,1.3,1.5,1.7,1.7,1.7,1.8,2.0,2.8,1.4,1.7 - Growth of exports of G&S (US dollar terms, in percent): 13.4,2.0,8.5,11.0,4.0,3.2,4.1,3.9,3.5,2.8,2.8,7.7,4.0 - Growth of imports of G&S (US dollar terms, in percent): 18.1,7.6,4.1,1.6,4.7,3.8,2.7,2.2,4.7,3.0,3.0,4.7,3.2 - Grant element of new public sector borrowing (in percent) (selected): 36.6,36.6,36.6,36.6,36.6,36.6,36.6,36.6 - Government revenues (excluding grants, in percent of GDP) (selected years): 11.1,11.6,12.9,15.8,16.1,16.3,16.3,16.3,16.3,16.3,16.3,13.2,16.2 - Aid flows (in Million of US dollars): 0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0 - Nominal GDP (Million of US dollars) (selected years): 48,570; 44,447; 45,719; 49,584; 51,560; 53,441; 55,308; 57,218; 59,237; 70,636; 96,210 - Nominal dollar GDP growth (selected): -7.3,-8.5,2.9,8.5,4.0,3.6,3.5,3.5,3.5,3.5,10.7,4.0 (1/ Current-year interest payments divided by previous period debt stock.) ### Key public sector debt indicators (Baseline Scenario, selected series) - Public sector debt (In percent of GDP) 2022–2044 (selected): 66.8,76.1,72.9,49.5,45.5,43.5,42.5,41.5,40.4,35.9,30.6,233.1,41.0 - of which: external debt (In percent of GDP) 60.5,59.7,52.5,35.1,31.9,30.1,29.0,28.0,27.0,24.1,19.6,41.8,27.9 - Change in public sector debt (In percent of GDP): 26.9,9.3,-3.2,-23.5,-4.0,-2.0,-1.0,-1.0,-1.0,-0.7,-0.3 - Identified debt-creating flows (In percent of GDP): 24.0,7.6,-10.0,-5.0,-3.5,-2.7,-2.4,-2.4,-2.4,-1.9,-1.3 - Primary deficit (In percent of GDP) (selected): 0.9,9.2,-0.2,0.1,-0.2,-0.3,-0.2,-0.2,-0.1,0.1,0.3 - Revenue and grants (In percent of GDP) (selected): 11.1,11.6,12.9,14.7,15.0,15.1,15.1,15.1,15.1,15.1,15.1 - Primary (noninterest) expenditure (In percent of GDP) (selected): 12.1,20.8,12.8,14.7,14.8,14.9,14.9,15.0,15.0,15.3,15.4 - Automatic debt dynamics (In percent of GDP) (selected): 23.1,-1.6,-9.8,-5.1,-3.2,-2.4,-2.2,-2.3,-2.2,-2.1,-1.6 - Contribution from nominal interest rate/growth differential (In percent of GDP, selected): -4.9,-5.4,-2.8,-5.1,-3.2,-2.4,-2.2,-2.3,-2.2,-2.1,-1.6 - Contribution from real GDP growth (In percent of GDP, selected): -2.3,-3.4,-1.3,-4.2,-2.2,-1.6,-1.5,-1.4,-1.4,-1.2,-1.0 - Residual (In percent of GDP, selected): 2.9,1.7,6.8,-18.4,-0.5,0.6,1.4,1.4,1.3,1.2,1.0 - PV of public debt-to-GDP ratio (selected years): 74.5,49.7,45.3,42.7,41.2,39.9,38.5,34.4,29.5 - PV of public debt-to-revenue and grants ratio (selected years): 576.2,338.7,301.6,282.5,272.6,263.6,254.3,227.4,194.8 - Debt service-to-revenue and grants ratio (selected years): 11.1,18.1,13.7,23.2,19.8,23.3,23.5,25.7,27.7,23.4,22.5 - Gross financing need (selected years): 2.2,11.2,1.6,2.0,1.7,2.6,2.7,3.0,3.3,3.4,3.1 ### Sensitivity and stress-test insights (selected outcomes) - Table 3 and Table 4 present extensive sensitivity analysis for 2025–35 showing that under various alternative scenarios and bound tests: - PV of debt-to-GDP, PV of debt-to-exports, debt service-to-exports, and debt service-to-revenue ratios exhibit large increases under shocks such as combined contingent liabilities, commodity price shocks, and adverse primary balance outcomes. - Benchmarks/thresholds used in tests include 30 (PV of debt-to-GDP threshold), 100% (PV of debt-to-exports threshold), 10 (debt service-to-exports threshold), and 14 (debt service-to-revenue threshold), with bold values indicating breaches of thresholds. - Figures show that the most extreme stress tests for different indicators include: - Most extreme shock for Debt Service-to-Revenue Ratio: Primary Balance. - Most extreme shock for PV of Debt-to-Exports Ratio and PV of Debt-to-GDP Ratio: Combined contingent liabilities. - Most extreme shock for Debt Service-to-Exports Ratio: Primary Balance. - Drivers of debt dynamics (Figure 3) emphasize the roles of: - price and exchange rate changes, - real GDP growth, - nominal interest rate, - current account plus FDI, - residual/unexpected changes in debt. ### Policy implications highlighted by the content - Restoring access to external financing depends critically on a successful SMP and continued progress on governance and structural reforms. - Debt restructuring and legacy debt resolution remain priorities, with ongoing use of treasury bonds to settle blocked funds and negotiations to restructure remaining obligations. - Reliance on non-concessional commercial borrowing and domestic market financing is emphasized as a necessity given limited concessional access, despite unfavorable terms—underscoring the importance of regaining concessional financing access via arrears clearance and reforms. *Sources: Zimbabwe authorities and IMF staff estimates and projections* ### 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the ### 1zweea2025001-source-pdf — 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on the vertical axis. ### Macroeconomic outlook and recent developments - Growth slowed to "1.7 percent" in 2024; projected to expand by "6 percent" in 2025. - Authorities expect medium-term growth to remain robust at "around 5 percent". - Month-on-month inflation ranged between "-0.1 and 0.9 percent" over the first 6 months of 2025. - Year-on-year inflation is expected to decline to "30 percent" by end-2025. - Gross reserves rose from "US$530 million" in December 2024 to "US$731 million" in June 2025. - Current account performance: surpluses realized over the past decade, driven by robust mining sector performance, remittances, high international prices for gold, and record high tobacco production. - Expected export drivers: increased investments in lithium and demand from the green transition; mining (gold and platinum) and ICT, wholesale and retail trade are cited as growth contributors. ### Exchange rate and monetary framework - On "April 5, 2024", a new domestic currency named the Zimbabwe Gold (ZiG) was introduced and a de jure floating exchange rate arrangement was adopted; de facto classification remains "other managed." - On "April 8, 2024", the authorities discontinued the Foreign Exchange Auction System and adopted a market-determined willing buyer willing seller (WBWS) trading arrangement. - Zimbabwe has accepted the obligations of Article VIII, Sections 2, 3, and 4, but maintains the following exchange restrictions subject to IMF approval under Article VIII, Section 2(a): 1. A longstanding exchange restriction subject to IMF jurisdiction arising from unsettled balances under an inoperative bilateral payment agreement with Malaysia; 2. An exchange restriction arising from the rationing and allocation of foreign exchange by the RBZ, resulting in undue delays for FX for current international transactions; 3. An exchange restriction arising from the requirement for tax clearance certificates to access the WBWS market; 4. An exchange restriction arising from the cash margin requirement to access the WBWS market; 5. An exchange restriction arising from limits on converting ZiG into FX for certain current international transactions, including for moderate family remittances, travel purposes, and dividends; 6. An exchange restriction arising from direct limits on payments, including limits on remittances for moderate family living expenses and a limitation on dividends to the trading profits from the year concerned; 7. An exchange restriction arising from 5% administrative penalty fee on non-acquitted foreign payments for red-flagged importers before making payments for imports; and 8. An exchange restriction arising from restrictions on payments under non-registered supplier credit agreements. ### Fiscal policy, PFM, and public finances - Authorities emphasize fiscal prudence, achieved budget deficits "below 3 percent" for the 5-year period 2018–2022 and halted deficit financing by the central bank. - Transfer of quasi-fiscal operations of the Reserve Bank of Zimbabwe to the budget in 2023 increased pressures on public finances and widened the financing gap. - Ongoing PFM reforms and measures: - Technical work underway for a cash-management plan. - Monthly tracking of the fiscal financing gap as a monitoring tool. - Commitment to quarterly updates to plans, commitment controls at the purchase order stage, arrears reporting, Treasury Single Account (TSA) and cash management reforms. - Enhancing management of the public service wage bill to restore the slight breach of the wage bill to revenues ratio back to within the "55 percent" target. - Revenue mobilization goals: - Modernize tax systems, expand the tax base, better incorporate emerging sectors and formalize SMEs. - Improve tax administration efficiency and explore digital fiscal solutions. - Pursue a Medium-Term Revenue Strategy aiming for a revenue target in the order of "22 percent to 25 percent of GDP." ### State-owned enterprises and asset management - Mutapa Investment Fund (MIF) intended to manage public sector assets and transform SOE operations to reduce fiscal risks and enhance contribution to sustainable growth. - MIF operations subject to the Public Finance Management Act; entities under MIF expected to have strong governance frameworks, audited financial statements, and annual general meetings. - MIF has submitted required quarterly reports, including for the first quarter of the year, and is undergoing an external audit for 2024. - Authorities plan to clarify Mutapa’s mandate and governance structure in upcoming amendments to the enabling Act. ### Debt management, arrears clearance, and external re-engagement - Debt sustainability is a top priority; authorities view debt distress as a structural barrier to inclusive and sustainable growth. - Authorities are pursuing an Arrears Clearance and Debt Resolution Roadmap and adhere to a Medium-Term Debt Management Strategy. - Continued payments include legacy debts (blocked funds entities and payments to Former Farm Owners (FFOs) based on agreed terms) and token payments to International Financial Institutions and sixteen Paris Club Bilateral Creditors. - Joint IMF–World Bank product planned: "DSA for 2025 Article IV consultation" due "July 2025." ### IMF relations, financial position, and technical assistance - Membership: Joined "September 29, 1980"; Article VIII. - General Resources Account: - Quota "706.80" (SDR Million) "100.00 percent of Quota" - IMF's Holdings of Currency (Holdings Rate) "706.47" "99.95 percent of Quota" - Reserve Tranche Position "0.33" "0.05 percent of Quota" - SDR Department: - Net cumulative allocation "1,016.02" (SDR Million) "100.00 percent of Allocation" - Holdings "1.88" (SDR Million) "0.19 percent of Allocation" - Outstanding Purchases and Loans: "None" - Latest Financial Commitments (Arrangements listed): Stand-By Aug 02, 1999–Oct 01, 2000 (Amount Approved "141.36" SDR Million; Amount Drawn "24.74" SDR Million); Stand-By Jun 01, 1998–Jun 30, 1999 (Amount Approved "130.65" SDR Million; Amount Drawn "39.20" SDR Million); EFF Sep 11, 1992–Sep 10, 1995 (Amount Approved "114.60" SDR Million; Amount Drawn "86.90" SDR Million). - Overdue Obligations and Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs), Forthcoming: - Principal: (not separately listed) - Charges/Interest and Total: "15.05" (2025); "29.66" (2026); "29.66" (2027); "29.67" (2028); "29.64" (2029). - Implementation of HIPC, MDRI, and CCR: Not Applicable. - Technical assistance (since April 2024, as of May 27, 2025) spans Public Financial Management, Tax Administration, Gender/Inequality programs, Audit, Tax Policy, Expenditure Policy, Debt Management database development, Financial Supervision and Regulation (Basel III Capital Framework implementation and FSSR activities), Financial Crisis Management, Macroeconomic Frameworks, and Real Sector National Accounts, among others. ### Authorities’ statement and policy priorities - Authorities report a strong rebound in 2025 supported by favorable rains, agriculture and hydro-power production, and tight monetary policy complemented by fiscal measures delivering price and exchange rate stability. - Policy priorities highlighted: - Enhance policy credibility, consistency, predictability, and sustainability. - Pursue congruent fiscal and monetary policies to support local currency stability, using a gradual and measured approach balancing growth and inflation objectives. - Prioritize international re-engagement to normalize creditor relations and regain access to external financing. - Finalize National Development Strategy 2 (NDS2: 2026–2030) focusing on ten priority areas including de-dollarization roadmap towards a mono currency by 2030 and operational clarity on USD and ZiG bank deposits and export surrender requirements. - Strengthen PFM, reduce non-essential spending, restructure some debt service obligations, and improve supplier payments to avoid disruptions to essential services. *August 11, 2025 — ZIMBABWE STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX* ### 11. The authorities also view international re-engagement as critical to facilitate arrears clearance ### 11. The authorities also view international re-engagement as critical to facilitate arrears clearance ### International re-engagement, arrears clearance, and debt resolution - The authorities have established a Structured Dialogue Platform (SDP) with all creditors and development partners to institutionalize dialogue on economic and governance reforms to guide the Arrears Clearance and Debt Resolution Process. - The SDP continues to hold meetings and High-Level Debt Resolution Forums, the latest of which were held in April and May 2025. - Reforms are advancing under the SDP’s three pillars: Economic reforms, Governance reforms, and Land Tenure and Compensation of Former Farm Owners, including resolution of Bilateral Investment Protection and Promotion Agreements (BIPPAs). - The authorities emphasize a balanced mix of fiscal consolidation, strengthened public debt management, growth-promoting structural reforms, and external arrears resolution to pave the way for new financing from multilateral creditors and bilateral official creditors. - Clearance of arrears to International Financial Institutions (IFIs) will be essential for debt resolution with official creditors and may require a bridge loan. - The authorities plan to launch a fourth pillar under the SDP, dedicated to debt resolution. - The authorities view an IMF Staff Monitored Program (SMP) as important and continue to engage with staff on the parameters of such a program. ### Monetary and exchange rate policies - The Reserve Bank of Zimbabwe (RBZ) upholds price stability as the sole objective of monetary policy. - The RBZ communicates a monetary framework in which the exchange rate is an intermediate target while reserve money is the operational target. - The RBZ has sustained a sufficiently tight monetary policy stance to durably anchor and foster price, currency and exchange rate stability. - Under this arrangement the RBZ has kept money supply growth under control to anchor expectations, stabilize the exchange rate, and place inflation onto a firm downward path. - The RBZ discontinued quasi-fiscal operations (transferred to the Treasury) and halted monetary financing of the fiscal deficit. - This policy thrust has supported sustained disinflation without compromising economic growth prospects. - The RBZ re-affirmed its commitment to further strengthen the monetary policy framework, incorporating communication into the monetary policy toolkit and envisaging transition from direct to indirect tools, including multiple tenors for NNCDs and establishment of a Term Deposit Facility. - Considering still elevated year on year inflation owing to base effects, the RBZ has maintained a tight monetary policy stance and has not adjusted the policy rate and statutory reserve levels to avoid de-anchoring of inflation expectations. - Future monetary policy decisions will remain data-dependent to avoid a pre-mature loosening of monetary policy that could reverse the gains made thus far. - On the exchange rate front: - The RBZ continues to reform the foreign exchange market to allow greater interplay of market forces and increased flexibility in the Willing-Buyer Willing-Seller (WBWS) market. - The WBWS market has served the country well, with the market clearing and entities trading daily; the RBZ confines interventions to smoothening volatile market conditions and liquefying the FX market. - The RBZ sees merit in creating a new interbank FX trading platform while addressing current market segmentation. - Presently, there is limited FX trading among banks due to correspondent banking restrictions and accompanying settlement risks. - The Fund’s technical assistance in establishing the interbank trading system will be key; the authorities have requested such assistance. - The authorities view the Fund’s position on exchange restrictions (Box 1 of the Staff Report) as overtaken by policy actions that removed several of them as they applied to the abandoned auction system: the requirement for a tax clearance certificate to access FX, rationing or allocation of FX and implementation of a cash margin are no longer applicable since abandonment of the FX auction system. - According to current policy, dividends are 100 percent remittable. ### Financial sector policies - The Zimbabwean banking sector remains profitable and adequately capitalized, with satisfactory asset quality (the non-performing loan ratio is low at around 3 percent). - Authorities remain vigilant to emerging financial stability vulnerabilities and are determined to continue strengthening regulatory and supervisory practices. - Plans to finalize the Basel III capital framework are underway, incorporating guidance from recommendations from recent IMF technical assistance and based on the 2019 Financial Sector Stability Review (FSSR). - Safeguarding financial sector integrity and strengthening the anti-money laundering regime remain critical to maintain Zimbabwe’s compliance with FATF requirements since the country’s exit from the FATF grey list in 2022 and removal from the European Commission’s list of High-Risk Third countries. - The authorities are closing outstanding legal gaps and strengthening the effectiveness of combating financial crime. - The third iteration of the National Risk Assessment (NRA) was completed in April 2025, with the assistance of the World Bank. - The NRA will inform Zimbabwe’s 2025-2029 AML/CFT Strategy, focusing on enhancing risk management, regulatory compliance, and institutional capacity. - Government amended the Private Voluntary Organizations Act to address deficiencies relating to cooperation between public authorities and Non-Profit Organizations (NPOs) and combating the abuse of NPOs for terrorist financing. - An electronic register for beneficial ownership (BO) information has been established; authorities aim to expedite company registration on the BO register and sharing information with competent authorities, law enforcement agencies, and reporting entities, as well as strengthen capacity building and law enforcement for ML/TF activities. - Authorities recognize the importance of enhanced access to financial services for sustainable and inclusive economic development and growth and continue collaborative efforts to implement the National Financial Inclusion Strategy (NFIS) II (2022-2026). - The RBZ, in partnership with other stakeholders, is pursuing programs to advance financial literacy in the various provinces. ### Structural and governance reforms; climate and social protection - Authorities are advancing structural reforms to strengthen governance, accelerate economic transformation, and promote a conducive environment for diversification, private sector development, and inclusive growth. - Implementation continues of the recommendations of the 2020 Governance and Corruption Assessment. - Capacity of the Zimbabwe Anti-Corruption Commission (ZACC) is being strengthened. - Progress has been made in developing the National Anti-Corruption Plan (NACP 2), which focuses on enhancing accountability, transparency, and integrity within the public sector drawing from the IMF’s 2020 Governance and Corruption Assessment and lessons from NACP 1. - To improve the business environment, authorities have made a high-level commitment to improve the ease of doing business by addressing high regulatory and utility costs and enhancing border efficiency; they aim to create a conducive business environment that attracts domestic and foreign investment, fosters innovation, and promotes sustainable economic growth through streamlining business regulations, reducing compliance costs and eliminating bureaucratic inefficiencies. - The Zimbabwe Investment and Development Agency (ZIDA) continues to be leveraged as a one-stop investment shop to streamline investment procedures and reduce turnaround times. - Climate vulnerability: - The country’s elevated vulnerability to climate change-induced extreme weather events places mitigation and adaptation efforts high on the authorities’ climate agenda. - The Government is set to finalize the carbon credit regulatory framework which sets out specific guidelines to safeguard the market. - Social protection: - Ensuring inclusive access to social protection remains a priority. - Authorities are working to establish a single social registry supported by the Integrated Social Protection Management Information System (ISPMIS) to help with better targeting. - Cabinet is expected to review the system in the context of adopting Zimbabwe's National Social Protection policy framework. ### Conclusion and outlook - Authorities reiterate their resolve to implement an appropriate mix of mutually reinforcing policies designed to entrench macroeconomic stability and support inclusive and sustainable growth. - Structural reform implementation is viewed as crucial to realizing developmental goals. - Re-engagement with the international community and normalization of creditor relations are sought to unlock critical and affordable external financing. - Authorities appreciate Fund advice and technical support and look forward to Executive Directors’ support in concluding the 2025 Article IV consultations. *Source: 1zweea2025001-source-pdf - 11. The authorities also view international re-engagement as critical to facilitate arrears clearance* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1zweea2025001-source-pdf.pdf_