{
  "title": "IMF Executive Board Concludes 2017 Article IV Consultation with Zimbabwe",
  "publication": "IMF News, July 7, 2017",
  "sourceUrl": "https://www.imf.org/en/news/articles/2017/07/07/pr17267-imf-executive-board-concludes-2017-article-iv-consultation-with-zimbabwe",
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  "summary": "On July 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Zimbabwe.",
  "publishDate": "2017-07-07",
  "sections": [
    {
      "heading": "Overview",
      "content": "- On July 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Zimbabwe.\n- Zimbabwe’s economy is facing difficulties driven by a severe drought, slow reform momentum, high expenditure levels since late 2015, and limited access to foreign inflows.\n- Fiscal imbalances have become unsustainable and are being financed by rising domestic borrowing, contributing to cash shortages and the introduction of capital and current account controls and quasi-currency instruments in the dollarized economy.\n- An overvalued real exchange rate is hurting external competitiveness."
    },
    {
      "heading": "Fiscal, Monetary, and Financial Conditions",
      "content": "- Expansionary fiscal stance, curtailed net capital flows, and declining investor confidence have resulted in cash shortages.\n- Budgetary operations are crowding out the private sector; expenditure is tilted towards employment costs and unsustainable agricultural support, inhibiting investment in infrastructure and social outlays.\n- Ongoing deficit financing modalities, particularly credit from the central bank, are unsustainable and pose inflationary risks.\n- Marked increase in public debt is crowding out private activity, aggravating liquidity shortages, and exacerbating debt distress.\n- Dollar scarcity has led to administrative controls on current and capital account transactions.\n- Bank asset concentration on non‑liquid central bank deposits and treasury bills has increased financial sector fragility; extensive use of quasi‑currency instruments exacerbates fragility.\n- Credit to the private sector remains subdued; some domestic banks face increasing risks emanating from fiscal imbalances."
    },
    {
      "heading": "Structural Reforms and Reengagement",
      "content": "- Some progress has been made on reforms to improve the business climate.\n- Limited progress remains on:\n  - Implementation of laws applicable to non-indigenous investors.\n  - Improvements in the functioning of state-owned enterprises.\n  - Upgrades in public financial management, governance, and accountability.\n- Zimbabwe has settled all overdue obligations to the PRGT but has yet to reach agreement with the World Bank and other multilateral institutions on the settlement of arrears.\n- Reengagement with the international community is facing delays; determined reform implementation and reengagement are key to unlocking external financing, fostering investment, and resolving the debt overhang.\n- Directors cautioned against clearing arrears using modalities which exacerbate debt problems."
    },
    {
      "heading": "Executive Board Assessment and Policy Recommendations",
      "content": "- Directors stressed the urgency of fiscal consolidation to restore policy credibility and economic stability.\n- Public sector employment costs are at an unsustainable level, constraining social and infrastructure spending.\n- Authorities are encouraged to:\n  - Engage only in well‑targeted, cost effective, and properly budgeted support to the agricultural and other productive sectors.\n  - Enhance tax revenues.\n  - Strengthen public financial management and reform state‑owned enterprises.\n  - Bolster the regulatory and supervisory framework for the financial sector.\n  - Close loopholes in the AML/CFT framework.\n  - Roll back exchange controls.\n  - Implement comprehensive actions to provide a level playing field for investors through consistent and transparent implementation of laws, and measures to combat corruption.\n- Directors underscored the need to restore credibility of the currency regime and safeguard the financial sector.\n- Directors welcomed Zimbabwe’s clearance of arrears to the IMF and encouraged an early resolution of arrears to other IFIs and bilateral creditors."
    },
    {
      "heading": "Growth Outlook",
      "content": "- Growth in 2017 is expected to be supported by a strong performance in agriculture mainly due to exceptional rains.\n- Medium‑term economic activity is projected to remain subdued pending adjustment and reform to restore fiscal and external sustainability and achieve growth potential."
    },
    {
      "heading": "Key Statistics — Zimbabwe: Selected Economic Indicators, 2013–16",
      "content": "- Output\n  - Real GDP Growth (annual percentage change): 2013: 5.3; 2014: 2.8; 2015: 1.4; 2016 (Est.): 0.7\n  - Nominal GDP (US$ millions): 2013: 15,224; 2014: 15,834; 2015: 16,072; 2016 (Est.): 16,124\n  - GDP deflator (annual percentage change): 2013: 2.9; 2014: 1.2; 2015: 0.1; 2016 (Est.): -0.3\n- Inflation (annual percentage change)\n  - Consumer price index (annual average): 2013: 1.6; 2014: -0.2; 2015: -2.4; 2016 (Est.): -1.6\n  - Consumer price index (end-of-period): 2013: 0.3; 2014: -0.8; 2015: -2.5; 2016 (Est.): -0.9\n- Central government (percent of GDP)\n  - Revenue and grants: 2013: 24.6; 2014: 23.8; 2015: 23.3; 2016 (Est.): 21.7\n  - Expenditure and net lending: 2013: 26.7; 2014: 25.4; 2015: 25.9; 2016 (Est.): 30.8\n  - Overall balance (cash basis): 2013: -1.9; 2014: -8.8; 2015: [blank in source]; 2016 (Est.): [blank in source]\n- Money and credit (US$ millions)\n  - Broad money (M3): 2013: 3,888; 2014: 4,377; 2015: 4,736; 2016 (Est.): 5,638\n  - Net foreign assets: 2013: -730; 2014: -693; 2015: -628; 2016 (Est.): -556\n  - Net domestic assets: 2013: 5,100; 2014: 5,367; 2015: 5,611; 2016 (Est.): 6,292\n- Money and credit (annual percentage change)\n  - Domestic credit (net): 2013: 6.2; 2014: 4.2; 2015: 8.8; 2016 (Est.): 19.8\n  - Of which: Credit to the private sector: 2013: 3.7; 2014: 4.7; 2015: -2.3; 2016 (Est.): -3.6\n- Balance of payments (US$ millions)\n  - Current account balance: 2013: -2,375; 2014: -2,395; 2015: -1,495; 2016 (Est.): -662\n  - (percent of GDP): 2013: -15.6; 2014: -15.1; 2015: -9.3; 2016 (Est.): -4.1\n- Official reserves (end-of-period)\n  - Gross international reserves (US$ millions): 2013: 284; 2014: 303; 2015: 339; 2016 (Est.): 310\n  - (months of imports of goods and services): 2013: 0.4; 2014: 0.5; 2015: 0.6; 2016 (Est.): 0.5\n- Debt (end-of-period)\n  - Domestic debt (US$ millions): 2013: 479; 2014: 1,764; 2015: 2,281; 2016 (Est.): 4,006\n  - (percent of GDP): 2013: 3.1; 2014: 11.1; 2015: 14.2; 2016 (Est.): 24.8\n  - PPG external debt (US$ millions): 2013: 5,389; 2014: 6,407; 2015: 6,613; 2016 (Est.): 7,231\n  - (percent of GDP): 2013: 35.4; 2014: 40.5; 2015: 41.1; 2016 (Est.): 44.8\n\nPress Release No. 17/267, July 7, 2017 — IMF Communications Department.\n\n---\n\n\n References\n\n- The Executive Board\n- Zimbabwe and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- [[1]](https://prd-sitecorecm.imf.org/?scitemid=%7BA5427386-C888-4DD7-91C9-5BD998DB6E4F%7D&sclang=en&scmode=preview)\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/07/07/pr17267-imf-executive-board-concludes-2017-article-iv-consultation-with-zimbabwe"
    }
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    "Published: July 7, 2017",
    "On July 5, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Zimbabwe.",
    "Zimbabwe’s economy is facing difficulties driven by a severe drought, slow reform momentum, high expenditure levels since late 2015, and limited access to foreign inflows.",
    "Fiscal imbalances have become unsustainable and are being financed by rising domestic borrowing, contributing to cash shortages and the introduction of capital and current account controls and quasi-currency instruments in the dollarized economy.",
    "An overvalued real exchange rate is hurting external competitiveness.",
    "Expansionary fiscal stance, curtailed net capital flows, and declining investor confidence have resulted in cash shortages.",
    "Budgetary operations are crowding out the private sector; expenditure is tilted towards employment costs and unsustainable agricultural support, inhibiting investment in infrastructure and social outlays.",
    "Ongoing deficit financing modalities, particularly credit from the central bank, are unsustainable and pose inflationary risks.",
    "Marked increase in public debt is crowding out private activity, aggravating liquidity shortages, and exacerbating debt distress.",
    "Dollar scarcity has led to administrative controls on current and capital account transactions.",
    "Bank asset concentration on non‑liquid central bank deposits and treasury bills has increased financial sector fragility; extensive use of quasi‑currency instruments exacerbates fragility.",
    "Credit to the private sector remains subdued; some domestic banks face increasing risks emanating from fiscal imbalances.",
    "Some progress has been made on reforms to improve the business climate.",
    "Limited progress remains on:",
    "Zimbabwe has settled all overdue obligations to the PRGT but has yet to reach agreement with the World Bank and other multilateral institutions on the settlement of arrears.",
    "Reengagement with the international community is facing delays; determined reform implementation and reengagement are key to unlocking external financing, fostering investment, and resolving the debt overhang.",
    "Directors cautioned against clearing arrears using modalities which exacerbate debt problems.",
    "Directors stressed the urgency of fiscal consolidation to restore policy credibility and economic stability.",
    "Public sector employment costs are at an unsustainable level, constraining social and infrastructure spending.",
    "Authorities are encouraged to:",
    "Directors underscored the need to restore credibility of the currency regime and safeguard the financial sector.",
    "Directors welcomed Zimbabwe’s clearance of arrears to the IMF and encouraged an early resolution of arrears to other IFIs and bilateral creditors.",
    "Growth in 2017 is expected to be supported by a strong performance in agriculture mainly due to exceptional rains.",
    "Medium‑term economic activity is projected to remain subdued pending adjustment and reform to restore fiscal and external sustainability and achieve growth potential.",
    "Output",
    "Inflation (annual percentage change)",
    "Central government (percent of GDP)",
    "Money and credit (US$ millions)",
    "Money and credit (annual percentage change)",
    "Balance of payments (US$ millions)",
    "Official reserves (end-of-period)",
    "Debt (end-of-period)",
    "[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Zimbabwe and the IMF](http://www.imf.org/external/country/ZWE/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[[1]](https://prd-sitecorecm.imf.org/?sc_itemid=%7BA5427386-C888-4DD7-91C9-5BD998DB6E4F%7D&sc_lang=en&sc_mode=preview)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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