IMF Staff Concludes Staff Visit to Zimbabwe

IMF News, October 25, 2023

Source details

IMF staff team led by Wojciech Maliszewski conducted a staff visit in Harare during October 18–25, 2023 to discuss recent economic developments and the economic outlook.
The mission held meetings with Minister of Finance, Economic Development and Investment Promotion Hon. Professor Mthuli Ncube; Permanent Secretary Mr. George Guvamatanga; Reserve Bank of Zimbabwe Governor Dr. John Mangudya; Deputy Chief Secretary to the President and Cabinet Mr. Willard Manungo; other senior government and RBZ officials; representatives of the private sector, civil society, and Zimbabwe’s development partners.
The outcome of this staff visit will serve as a key input in the preparations for a Staff Monitored Program (SMP) and the next Article IV consultation.

Real GDP is projected to grow by around 4.8 percent in 2023, supported by strong activity in the mining sector and—reflecting the beneficial impact of structural reforms—in agriculture and energy sectors.
Growth is expected to slow to 3.5 percent in 2024 due to weaker global demand for minerals and a weather-related slowdown in agriculture.
Local-currency (ZWL) inflation and exchange rate pressures have abated in recent months, following significant price increases and exchange rate depreciation in the second quarter of 2023.
The parallel FX market premium is large at above 30 percent.
The fiscal deficit, excluding QFOs, is projected at 2.3 percent of GDP in 2023.

The mission notes the authorities’ recent efforts into stabilizing the foreign exchange market and lowering inflation through the tightening of ZWL liquidity conditions.
The mission welcomes:
- the removal of surrender requirements on domestic sales in FX;
- the announced plan for the transfer of RBZ FX liabilities to the Treasury.
Nevertheless, the mission highlights that ZWL inflation remains high and that further actions are needed to restore macroeconomic stability.

Comprehensively address the RBZ’s quasi-fiscal operations (QFOs) to mitigate liquidity pressures and thus re-anchor inflation expectations.
Complement QFOs resolution with an enhanced liquidity management framework, including through the use of appropriate interest-bearing instruments by the RBZ to mop up excess liquidity.
Align the consolidated fiscal stance, including QFOs, with short-term stabilization objectives.
Accelerate FX market reform by:
- allowing more flexibility in the official exchange rate through a more transparent and market-driven price discovery;
- removing the restrictions on the exchange rate at which banks, authorized dealers, and businesses can transact;
- further minimizing export surrender requirements.
Pursue structural reforms aimed at improving the business climate and reducing governance vulnerabilities to promote sustained and inclusive growth and support Zimbabwe’s National Development Strategy 1 (2021-2025).

The Fund is precluded from providing financial support to Zimbabwe due to unsustainable debt—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears.
A Fund financial arrangement would require:
- a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears;
- a reform plan that is consistent with durably restoring macroeconomic stability, enhancing inclusive growth, lowering poverty, and strengthening economic governance.
International reengagement remains critical for debt resolution and access to financial support; the authorities' reengagement efforts—through the Structured Dialogue Platform—are noted as vital for attaining debt sustainability and gaining access to external financing.
The Fund continues to provide policy advice and extensive technical assistance in the areas of revenue mobilization, expenditure control, financial supervision, debt management, economic governance, and macroeconomic statistics.

IMF Press Release No. 23/361 — October 25, 2023.