IMF Staff Completes 2025 Article IV Mission to Zimbabwe
IMF News, June 18, 2025
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- Published: June 18, 2025
Mission overview
- An IMF staff team led by Mr. Wojciech Maliszewski visited Harare from June 4 to June 18, 2025, to conduct the 2025 Article IV Consultation.
- Press Release No. 25/203.
- The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- IMF staff will prepare a report based on these preliminary findings for presentation to the IMF’s Executive Board, subject to management approval.
Macroeconomic developments and outlook
- Zimbabwe is experiencing a degree of macroeconomic stability despite lingering policy challenges.
- Growth:
- Growth this year is recovering following a sharp slowdown in 2024.
- Growth projected at 6 percent in 2025.
- Agriculture and mining:
- 2024 drought lowered agricultural output by 15 percent.
- Electricity production fell in 2024.
- Declining prices for platinum and lithium weighed on mining output.
- During the first half of 2025, better climate conditions and historically high gold prices boosted agricultural and mining activity, strengthening the current account and contributing to the recovery.
- Inflation and exchange rates:
- Following an overnight drop in the value of the ZiG in September 2024, inflation spiked in October 2024 then declined significantly.
- Month-on-month inflation averaged 0.5 percent over the period February to May 2025.
- The gap between the willing-buyer willing-seller (WBWS) and parallel market rates has narrowed significantly, but remains at around 20 percent.
- The mission welcomed the repeal of Statutory Instrument 81A of 2024.
Fiscal developments and pressures
- Revenue and spending:
- Revenue ratio increased sharply to 18 percent of GDP, buoyed by policy measures including reduction in VAT tax reliefs, increased fees and levies, taxation of the COVID public servant allowance, and steps to reduce smuggling.
- Fiscal pressures intensified in 2024 and in the first months of 2025 as higher revenues proved insufficient to meet growing spending needs.
- Spending pressures included higher public sector wages, capital outlays related to a SADC summit, debt servicing costs on past quasi-fiscal operations (QFOs) by the RBZ taken over by the Treasury, and servicing liabilities related to the acquisition of assets for the Mutapa Investment Fund.
- Financing and arrears:
- The fiscal deficit was financed by T-bills issuance and direct borrowing from the RBZ’s overdraft facility to service debt, contributing to an expansion of domestic liquidity and the overnight drop in the value of the ZiG in September 2024.
- There was a significant buildup of expenditure arrears that continued into 2025.
Monetary and FX policy and market functioning
- Policy stance and tools:
- Stabilization was supported by halting and transferring to the Treasury the QFOs of the RBZ and tighter monetary policy despite fiscal pressures.
- The mission recommends introduction of an effective deposit facility at the RBZ, followed by full introduction of indirect market instruments and phasing out direct instruments.
- FX market recommendations:
- Improve functioning of the WBWS market through a more transparent price-setting mechanism.
- Gradually replace surrender requirements with a requirement to convert export proceeds directly into the market through Authorized Dealers.
- Focus RBZ FX interventions on managing excessive volatility in the exchange rate.
- Market outcomes:
- WBWS and parallel market rates have stabilized relative to the October 2024 spike, aiding disinflation.
Policy recommendations (Article IV priorities)
- Near-term fiscal policy:
- Center on closing the financing gap without recourse to monetary financing and further domestic arrears buildup, while safeguarding social spending.
- Deliver a durable fiscal adjustment in the longer term.
- Fiscal management and PFM:
- Rationalize spending and increase effectiveness of the authorities’ strategy to run a cash budget through better planning and stronger political commitment to control spending.
- Strengthen the public spending commitment control system to avoid further arrears accumulation.
- Closely monitor domestic arrears, including through an audit of remaining arrears.
- The 2026 Budget will be critical to establish a policy track record; measures will be needed to close the fiscal gap in 2026.
- Over the medium term, accompany fiscal adjustment with fiscal-structural policies to strengthen public financial management (PFM), expenditure controls, and budget credibility.
- Monetary and FX:
- Support transition to a stable national currency with an effective monetary policy framework and market-determined exchange rate policy.
- Enhance monetary policy tools (effective deposit facility, indirect instruments).
- Pursue a comprehensive package of macroeconomic, financial, and structural policies to allow gradual relaxation of other Capital Flow Management Measures (CFMs) and elimination of undesirable exchange restrictions noted by the Article VIII mission.
- Structural reforms to boost growth:
- Implement structural and economic governance reforms to bolster growth.
- Mutapa Investment Fund and SOEs:
- Strengthen governance framework for the Mutapa Investment Fund, including reporting, audit, disclosure, and oversight requirements in line with international best practices.
- Improve overall public sector transparency and reporting.
Currency transition and financial intermediation
- Authorities announced a plan to transition to a mono-currency system by 2030.
- The mission emphasized:
- Continue strengthening the monetary and FX market framework in line with IMF staff recommendations.
- Complement with measures to enhance demand for ZiG domestically, most notably increasing the share of Treasury’s operations (revenues and expenditures) in ZiG.
- Authorities should provide more clarity on operational implications of the transition plan, including clarifying that the use of a mono-currency will be limited to domestic transactions, allowing for bank deposits to remain denominated in both currencies.
Debt, arrears, and external financing
- IMF financial support constraints:
- The IMF is currently 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.
- An IMF financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and a reform plan consistent with durably restoring macroeconomic stability; enhancing inclusive growth; lowering poverty; and strengthening economic governance.
- International reengagement:
- International reengagement remains critical for debt resolution and arrears clearance, which would open the door for access to external financing.
- Authorities' reengagement efforts, through the Structured Dialogue Platform, are key for attaining debt sustainability and gaining access to concessional external financing.
IMF engagement, technical assistance, and next steps
- IMF support and TA:
- The IMF maintains active engagement and continues to provide policy advice and extensive technical assistance in revenue mobilization, expenditure control, financial supervision, debt management, economic governance, and macroeconomic statistics.
- Policy discussions and SMP:
- In the context of the requested SMP, IMF staff stands ready to resume discussions once decisive steps have been taken by authorities to address key policy issues highlighted by the mission.
- Meetings conducted:
- IMF staff held meetings with His Excellency President Emmerson Mnangagwa; Minister of Finance, Economic Development and Investment Promotion Honorable Professor Mthuli Ncube; Deputy Minister Honorable David Mnangagwa; Permanent Secretary Mr. George Guvamatanga; Reserve Bank of Zimbabwe Governor Dr. John Mushayavanhu; Mr. Willard Manungo, Deputy Chief Secretary to the President and Cabinet; other senior government and RBZ officials; honorable members of Parliament; and representatives of the private sector, civil society, and Zimbabwe’s development partners.
Source: IMF Staff Completes 2025 Article IV Mission to Zimbabwe, Press Release No. 25/203, June 18, 2025.