IMF Managing Director Approves a Staff-Monitored Program for Zimbabwe

IMF News, May 31, 2019

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The Managing Director of the IMF approved on May 15, 2019, a Staff-Monitored Program (SMP) for Zimbabwe, covering the period of May 15, 2019 to March 15, 2020.[1]
The SMP is designed to support the authorities’ reform agenda, assist in building a track record of implementation of a coherent set of economic and social policies, facilitate a return to macroeconomic stability, and assist in reengagement with the international community.
The SMP will be monitored on a quarterly basis.
[1] An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.

Zimbabwe faces deep macroeconomic imbalances following:
- Move to full dollarization in late 2008 to break hyperinflation.
- Substantial fiscal deficits during 2016–18 financed by issuance of quasi-currency instruments nominally at par to the US dollar and continued accumulation of external arrears.
- Fragile equilibrium maintained through exchange controls and other restrictions on access to foreign exchange, creating deep distortions for economic activity.
The new government (assumed office following the July 2018 elections) is committed to:
- Addressing macroeconomic imbalances.
- Removing structural distortions to facilitate resumption in growth.
- Re-engaging with the international community including by clearing its external arrears.
Authorities’ actions taken prior to the SMP include:
- Halting the issuance of quasi-currency instruments to finance the deficit (since September 2018).
- Introducing a new domestic currency in February 2019.
The authorities elaborated a comprehensive structural reform program—the Transitional Stabilization Program—to address structural rigidities while taking key macroeconomic steps.

Macroeconomic and financial sector stability measures:
- Implementing a large fiscal adjustment.
- Elimination of central bank financing of the fiscal deficit.
- Adoption of reforms to allow the effective functioning of market-based foreign exchange and debt markets.
Structural reforms:
- Steps to reform and privatize state owned enterprises.
- Enhance governance including in procurement and revenue administration.
- Improve the business environment.
Social safeguards:
- The SMP includes important safeguards to protect the country’s most vulnerable people.

Risks to the SMP are high, including materialization of two external shocks:
- El Niño related drought impacting agricultural production and electricity supply.
- Extensive damage caused by Cyclone Idai in March.
These shocks complicate an already difficult near-term economic outlook as the economy adjusts to the new policy regime.
To mitigate potential risks from capacity constraints, the IMF will support the authorities’ efforts in all policy areas covered by the SMP through tailored technical assistance.

Output and Prices
- Real GDP growth (%): 0.7, 4.7, 3.4, -2.1
- Nominal GDP (US$ millions): 20,549, 22,041, 23,113, 22,679
- Inflation (%, average): -1.6, 0.9, 10.6, 80.8
- Inflation (%, eop): -0.9, 42.1, 49.6, …

Central government finances
- Revenue and grants (% GDP): 16.8, 14.1, 12.8, 13.3
- Expenditure and net lending (% GDP): 23.9, 24.0, 18.5, 17.3
- Overall balance (% GDP): -6.7, -9.7, -7.1, -4.0

Public debt
- Consolidated public sector debt (% GDP): 49.1, 54.9, 66.4, 55.9
- Public and publicy-guaranteed external debt (% GDP): 38.9, 40.1, 41.6, 45.4

Money and credit
- Money supply (% change): 18.8, 44.2, 24.1, 32.3
- Credit to private sector (% change): -3.9, 5.9, 4.0, 5.0
- Exchange rate (RTGS per USD, eop): 1.1, 1.5, 3.5, …

Balance of payments
- Current account (% GDP): -3.5, -1.3, -4.5, -2.2
- FDI (% GDP): 1.7, 1.4, 1.6
- Reserves (months of imports): 0.6, 0.5, 0.1, 0.2

Source: IMF Press Release No. 19/189 — IMF Managing Director Approves a Staff-Monitored Program for Zimbabwe (May 31, 2019).