IMF Staff Completes 2024 Article IV Mission to Zimbabwe

IMF News, February 14, 2024

Source details

Mission dates: January 31-February 14, 2024.
Press release date: February 14, 2024.
IMF team leader: Mr. Wojciech Maliszewski.
Purpose: Discuss authorities’ request for a Staff Monitored Program (SMP) and commence 2024 Article IV Consultation.
Statement nature: End-of-Mission press release conveying preliminary findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

GDP growth in 2023 is estimated at 5.3 percent.
Growth projection for 2024: expected to decelerate to about 3¼ percent.
Drivers in 2023: expansion in agriculture and mining; highly-dollarized domestic trade and services buoyed by related foreign currency inflows and remittances.
2024 headwinds: impact of a drought on agriculture production and lower commodity prices expected to reduce foreign currency inflows; remittances likely to remain strong.
Current account: projected to be in small surplus.
Domestic liquidity: surplus in the dollarized part of the economy expected to support growth in domestic trade, services, and construction.

Official exchange rate depreciation: about 95 percent since the beginning of December 2023.
Gap to parallel market rate: remains wide (above 30 percent).
ZWL inflation: described as still very high.
Exchange restrictions issue: retailers prescribed to use the official ZWL exchange rate with up to a 10 percent margin—this inflates US dollar prices, promotes informality, erodes the tax base, and undermines longer-term growth prospects.

Priority focus: finalize transfer of the Reserve Bank of Zimbabwe’s (RBZ) quasi-fiscal operations to the Treasury and address other sources of fiscal pressures.
RBZ external liabilities to be transferred to the Treasury include: long-term loans, short-term liabilities, and the “blocked funds”.
Fiscal impact: larger-than-anticipated costs of servicing these obligations will open a financing gap in the 2024 budget.
IMF staff encouragements:
- Identify options to close the financing gap in a way that avoids inflationary financing.
- Develop and implement a comprehensive plan to close the gap.
- Ensure appropriate legal framework is in place to complete the transfer.
Other fiscal sources: non-core (not related to the goal of price and financial stability) operations of the RBZ and operations of SOEs.

Emphasis on structural reforms to:
- Improve the business climate.
- Strengthen economic governance.
- Reduce corruption vulnerabilities.
Link to national strategy: reforms would support Zimbabwe’s National Development Strategy 1 (2021-2025).
Specific governance advice:
- Ensure corporate governance arrangements, transparency and financial reporting, and accountability oversight of the recently established Mutapa fund are in line with international standards and good practices.

Debt overhang: resolution required for sustainable development.
International reengagement: critical for debt resolution and access to financial support.
Authorities’ reengagement channel: Structured Dialogue Platform.
Current IMF constraint: IMF is precluded from providing financial support to Zimbabwe due to its unsustainable debt situation—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears.
Preconditions for an IMF financial arrangement:
- Clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears.
- A reform plan consistent with durably restoring macroeconomic stability; enhancing inclusive growth; lowering poverty; and strengthening economic governance.

Ongoing IMF support areas: revenue mobilization, expenditure control, financial supervision, debt management, economic governance and anti-corruption, and macroeconomic statistics.
Stakeholders consulted: Minister of Finance and Economic Development Hon. Professor Mthuli Ncube; Deputy Minister Hon. David Mnangagwa; RBZ Governor Dr. John Mangudya; other senior government and RBZ officials; private sector; civil society organizations; and Zimbabwe’s development partners.

Finalize transfer of RBZ QFO-related external liabilities to the Treasury and put in place appropriate legal framework.
Develop and implement a comprehensive, non-inflationary plan to close the 2024 budget financing gap created by QFO transfers.
Accelerate FX market reform, including:
- Promote transparent, market-driven price discovery in the official exchange rate.
- Remove exchange restrictions and eliminate the 10 percent allowable trading margin for pricing domestic transactions.
Establish an effective exchange rate and monetary policy framework; amend the RBZ Act to narrow RBZ mandate to core functions.
Progress structural reforms to improve business climate, strengthen governance, and reduce corruption vulnerabilities; ensure Mutapa fund governance meets international standards.
Advance international reengagement through the Structured Dialogue Platform to enable debt restructuring, clearance of arrears, and access to concessional financing.

Source: IMF staff end-of-mission press release, February 14, 2024.