IMF Staff Concludes Visit for the Article IV Consultation and Discussions on the First Review of the Staff-Monitored Program to Zimbabwe

IMF News, September 26, 2019

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Canonical URL: IMF Staff Concludes Visit for the Article IV Consultation and Discussions on the First Review of the Staff-Monitored Program to Zimbabwe

IMF mission led by Mr. Gene Leon visited Harare from September 5th to 19th to conduct the Article IV Consultation and review progress under Zimbabwe’s Staff-Monitored Program (SMP).
Discussions covered recent economic developments, the near and medium-term outlook, risks to the economy, developments in the financial sector, and the set of economic policies needed to restore stability and build the foundations for strong, sustainable, and balanced growth.
End-of-mission caveat: “The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board or Management.”

“Economic difficulties have continued throughout 2019, exacerbated by severe weather shocks.”
Growth and output:
- “GDP growth in 2019 is expected to be steeply negative as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth.”
Food security and social conditions:
- “Social conditions have deteriorated sharply, with more than half of Zimbabwe’s population (8.5 million people) estimated by the UN to be food insecure in 2019/2020.”
Exchange rate and inflation:
- “Since the February currency reform, the exchange rate has depreciated from USD 1:1 ZWL to USD 1:16.5 ZWL (as of September 23), fostering high inflation, which reached almost 300 percent (year-over-year) in August.”
Confidence and policy environment:
- “Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance has increased pressure on the exchange rate.”
External constraints:
- “Zimbabwe facing the impact of a severe drought and its external arrears preventing access to traditional avenues of external financing.”

Fiscal risks:
- “Risks to budget execution are high as demands for further public sector wage increases, quasi-fiscal activities of the RBZ that will need to be absorbed by the central government, and pressure to finance agriculture could push the deficit back into an unsustainable stance.”
Monetary and FX risks:
- Need to “strengthen FX market operations and improve transparency on monetary statistics.”
- “A recent expansionary monetary stance has increased pressure on the exchange rate.”
Reengagement risks:
- “These adjustment challenges are magnified by slow progress on international reengagement.”

Urgent policy actions:
- “Policy actions are urgently needed to tackle the root causes of economic instability and enable private-sector led growth.”
Fiscal policy:
- Contain fiscal spending consistent with non-inflationary financing.
Monetary policy:
- Tighten monetary policy to stabilize the exchange rate and start rebuilding confidence in the national currency.
Transparency and institutional measures:
- Improve transparency on monetary statistics.
- Strengthen FX market operations.
Social protection:
- Accommodate spending to alleviate food insecurity and protect vulnerable groups while restoring stability.
Political and external engagement:
- “Efforts will need to be intensified on both economic and political fronts to drive Zimbabwe forward.”

IMF staff and authorities agreed to maintain a close and continuous dialogue in the coming weeks on economic policies.
Dialogue is anticipated to continue during the IMF and World Bank Annual Meetings, taking place October 14-20, 2019.
Mission meetings included H.E. President E. Mnangagwa, Finance Minister M. Ncube, RBZ Governor J.P. Mangudya, other senior officials, members of Parliament, representatives of the private sector, civil society, and development partners.

Press Release No. 19/355, September 26, 2019 — IMF Communications Department