{
  "title": "IMF Executive Board Concludes 2020 Article IV Consultation with Zimbabwe",
  "publication": "IMF News, February 26, 2020",
  "sourceUrl": "https://www.imf.org/en/news/articles/2020/02/26/pr2072-zimbabwe-imf-executive-board-concludes-2020-article-iv-consultation",
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  "summary": "Date of Board conclusion: February 24, 2020.",
  "publishDate": "2020-02-26",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Date of Board conclusion: February 24, 2020.\n- Staff report and Board meeting occurred before COVID-19 became a pandemic; the staff report does not reflect COVID-19 implications.\n- COVID-19 is expected to adversely impact Zimbabwe’s economic outlook and require additional health-related spending and international support.\n- Zimbabwe is described as experiencing an economic and humanitarian crisis."
    },
    {
      "heading": "Macroeconomic situation and outlook",
      "content": "- 2019: sharp economic contraction, amplified by climate shocks affecting agriculture and electricity generation.\n- The newly introduced ZWL$ has lost most of its value; inflation is very high; international reserves are very low.\n- Climate shocks magnified social impacts of fiscal retrenchment; more than half of the population is food insecure.\n- With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing.\n- Authorities face a trade-off: tight monetary policy to reduce very high inflation and prudent fiscal policy to address macro imbalances and build confidence in the currency, while averting a humanitarian crisis.\n- The 2020 budget includes a significant increase in social spending, but is likely insufficient to meet pressing social needs. Absent scaling up of donor support, the risks of a deep humanitarian crisis are high."
    },
    {
      "heading": "Policy actions, reform progress, and reengagement",
      "content": "- Government agenda since 2018: focus on macro stabilization and reforms.\n- Staff Monitored Program: adopted in May 2019, now off-track due to mixed policy implementation.\n- Notable reforms implemented:\n  - significant fiscal consolidation that helped reduce monetary financing of the deficit;\n  - introduction of the new domestic currency in February 2019;\n  - creation of an interbank FX market;\n  - restructuring of command agriculture financing model to a public-private partnership with commercial banks.\n- Uneven implementation of reforms, including delays and missteps in FX and monetary reforms, failed to restore confidence in the new currency.\n- Reengagement with the international community faces delays:\n  - Authorities have yet to define modalities and financing to clear arrears to the World Bank and other multilateral institutions;\n  - Authorities have yet to undertake reforms to facilitate resolution of arrears with bilateral creditors.\n- Continued constraints on access to external official support."
    },
    {
      "heading": "Executive Board Assessment and recommendations",
      "content": "- Directors noted the economic and humanitarian crisis is exacerbated by policy missteps and climate shocks and will require difficult policy choices and international support.\n- Directors urged coordinated fiscal, monetary, and foreign exchange policies, and efforts to address food insecurity and serious governance challenges.\n- Directors emphasized the importance of reengagement with the international community to support economic sustainability and address the humanitarian crisis.\n- Fiscal policy:\n  - Noted pervasive deficits despite 2019 fiscal tightening; deficits could be exacerbated by humanitarian response needs.\n  - Called for non-essential spending cuts, including decisive reforms to agricultural support programs, to allow for social spending needs.\n  - Underscored the importance of public financial management and enhanced domestic revenue mobilization.\n- Monetary policy and exchange rate:\n  - Stressed that eliminating deficit monetization is crucial for fiscal sustainability and stabilization of hyper‑inflation and preservation of the currency’s external value.\n  - Underscored need to establish credibility in the new currency; encouraged establishment of a functional foreign exchange market and removal of distortions that lead to rent‑seeking.\n  - Agreed that given low reserves and hyper‑inflation, limited credibility, and lack of access to traditional external financing, a monetary targeting regime is appropriate.\n  - Recommended enhancing central bank independence and transparency, including timely publication of monetary statistics.\n- Financial sector:\n  - Welcomed progress on financial innovation, supervision and inclusiveness indicators.\n  - Recommended continued vigilance to ensure financial stability, conduct asset quality reviews of the banking sector, develop a new framework for managing weak banks, and increase the effectiveness of the AML/CFT framework, including effective implementation of FAFT standards.\n- Governance and reengagement:\n  - Stressed the need to address governance and corruption challenges, entrenched vested interests, and enforcement of the rule of law to improve the business climate and support private‑sector‑led inclusive growth.\n  - Noted such efforts would be instrumental to advance reengagement and mobilize needed support.\n  - Regretted that the Staff‑Monitored Program was off‑track and underscored importance of continued Fund engagement through technical assistance, policy advice and other innovative ways."
    },
    {
      "heading": "Key statistics and projections (selected)",
      "content": "- Real GDP growth (annual percentage change):\n  - 2016: 0.7\n  - 2017: 4.7\n  - 2018: 3.5\n  - 2019: -8.3\n  - 2020 (Prel): 0.8\n- Nominal GDP (US$ millions):\n  - 2016: 20,549\n  - 2017: 22,041\n  - 2018: 22,946\n  - 2019: 20,703\n  - 2020: 20,563\n- Nominal GDP (ZWL millions):\n  - 2016: 20,806\n  - 2017: 27,438\n  - 2018: 42,468\n  - 2019: 156,165\n  - 2020: 390,666\n- GDP deflator:\n  - 2016: 26.0\n  - 2017: 49.5\n  - 2018: 300.9\n  - 2019: 148.1\n- CPI (annual average):\n  - 2016: -1.6\n  - 2017: 0.9\n  - 2018: 10.6\n  - 2019: 255.3\n  - 2020: 221.1\n- CPI (end-of-period):\n  - 2016: -0.9\n  - 2017: 3.4\n  - 2018: 42.1\n  - 2019: 521.1\n  - 2020: 52.0\n- Money supply (M2) (annual percentage change):\n  - 2016: 18.8\n  - 2017: 39.0\n  - 2018: 24.0\n  - 2019: 127.5\n  - 2020: 24.4\n- Credit to the private sector (annual percentage change):\n  - 2016: -3.9\n  - 2017: 5.9\n  - 2018: 9.1\n  - 2019: 174.1\n  - 2020: 56.7\n- Credit to the central government (annual percentage change):\n  - 2016: 51.6\n  - 2017: 74.5\n  - 2018: 59.2\n  - 2019: 62.3\n  - 2020: 27.5\n- ZWL: USD exchange rate (annual average):\n  - 2016: 1.0\n  - 2017: 1.3\n  - 2018: 2.0\n  - 2019: 8.5\n  - 2020: …\n- Nominal central government (percent of GDP):\n  - Revenue and grants:\n    - 2016: 14.1\n    - 2017: 12.9\n    - 2018: 13.5\n    - 2019: 12.8\n  - Expenditure and net lending:\n    - 2016: 23.9\n    - 2017: 18.6\n    - 2018: 16.9\n    - 2019: 17.8\n  - Of which: Employment costs:\n    - 2016: 15.5\n    - 2017: 12.7\n    - 2018: 9.3\n    - 2019: 4.9\n    - 2020: 4.3\n  - Of which: Capital transfers and net lending:\n    - 2016: 4.1\n    - 2017: 5.8\n    - 2018: 5.0\n    - 2019: 3.3\n    - 2020: 4.0\n  - Overall balance:\n    - 2016: -7.1\n    - 2017: -9.9\n    - 2018: -5.7\n    - 2019: -3.4\n    - 2020: -5.0\n  - Primary balance:\n    - 2016: -6.4\n    - 2017: -9.0\n    - 2018: -4.8\n    - 2019: -3.0\n    - 2020: -4.6\n- Balance of payments (US$ millions):\n  - Exports of goods and services:\n    - 2016: 4,060\n    - 2017: 4,734\n    - 2018: 5,304\n    - 2019: 4,634\n    - 2020: 5,038\n  - Exports annual percentage change:\n    - 2016: 1.5\n    - 2017: 16.6\n    - 2018: 12.1\n    - 2019: -12.6\n    - 2020: 8.7\n  - Imports of goods and services:\n    - 2016: 6,427\n    - 2017: 6,555\n    - 2018: 7,617\n    - 2019: 5,455\n    - 2020: 6,417\n  - Imports annual percentage change:\n    - 2016: -14.4\n    - 2017: 16.2\n    - 2018: -28.4\n    - 2019: 17.7\n  - Current account balance (excluding official transfers) (US$ millions):\n    - 2016: -718\n    - 2017: -284\n    - 2018: -1,229\n    - 2019: 155\n    - 2020: -204\n  - Current account balance (percent of GDP):\n    - 2016: -3.5\n    - 2017: -1.3\n    - 2018: -5.4\n    - 2019: -1.0\n- Gross international reserves (US$ millions):\n  - 2016: 310\n  - 2017: 293\n  - 2018: 87\n  - 2019: 111\n  - 2020: 109\n- Months of imports of goods and services:\n  - 2016: 0.6\n  - 2017: 0.5\n  - 2018: 0.1\n  - 2019: 0.2\n  - 2020: (not separately listed)\n- Public debt:\n  - Consolidated public sector debt (e.o.p.) (US$ millions):\n    - 2016: 10,089\n    - 2017: 11,998\n    - 2018: 14,459\n    - 2019: 10,372\n    - 2020: 11,082\n  - Consolidated public sector debt (percent of GDP):\n    - 2016: 49.1\n    - 2017: 54.4\n    - 2018: 44.2\n    - 2019: 50.1\n    - 2020: 53.9\n  - Public and publicly guaranteed external debt (e.o.p.) (US$ millions):\n    - 2016: 7,997\n    - 2017: 8,829\n    - 2018: 8,672\n    - 2019: 9,865\n    - 2020: 10,591\n  - Public and publicly guaranteed external debt (percent of GDP):\n    - 2016: 38.9\n    - 2017: 40.1\n    - 2018: 37.8\n    - 2019: 47.6\n    - 2020: 51.5\n  - Of which: Arrears (US$ millions):\n    - 2016: 5,157\n    - 2017: 5,652\n    - 2018: 6,109\n    - 2019: 6,284\n    - 2020: 6,421\n  - Arrears (percent of GDP):\n    - 2016: 25.1\n    - 2017: 25.6\n    - 2018: 26.6\n    - 2019: 30.4\n    - 2020: 31.2\n\nIMF Communications Department, Press Release No. 20/72, February 26, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Zimbabwe and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\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/2020/02/26/pr2072-zimbabwe-imf-executive-board-concludes-2020-article-iv-consultation"
    }
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    "Published: February 26, 2020",
    "Date of Board conclusion: February 24, 2020.",
    "Staff report and Board meeting occurred before COVID-19 became a pandemic; the staff report does not reflect COVID-19 implications.",
    "COVID-19 is expected to adversely impact Zimbabwe’s economic outlook and require additional health-related spending and international support.",
    "Zimbabwe is described as experiencing an economic and humanitarian crisis.",
    "2019: sharp economic contraction, amplified by climate shocks affecting agriculture and electricity generation.",
    "The newly introduced ZWL$ has lost most of its value; inflation is very high; international reserves are very low.",
    "Climate shocks magnified social impacts of fiscal retrenchment; more than half of the population is food insecure.",
    "With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing.",
    "Authorities face a trade-off: tight monetary policy to reduce very high inflation and prudent fiscal policy to address macro imbalances and build confidence in the currency, while averting a humanitarian crisis.",
    "The 2020 budget includes a significant increase in social spending, but is likely insufficient to meet pressing social needs. Absent scaling up of donor support, the risks of a deep humanitarian crisis are high.",
    "Government agenda since 2018: focus on macro stabilization and reforms.",
    "Staff Monitored Program: adopted in May 2019, now off-track due to mixed policy implementation.",
    "Notable reforms implemented:",
    "Uneven implementation of reforms, including delays and missteps in FX and monetary reforms, failed to restore confidence in the new currency.",
    "Reengagement with the international community faces delays:",
    "Continued constraints on access to external official support.",
    "Directors noted the economic and humanitarian crisis is exacerbated by policy missteps and climate shocks and will require difficult policy choices and international support.",
    "Directors urged coordinated fiscal, monetary, and foreign exchange policies, and efforts to address food insecurity and serious governance challenges.",
    "Directors emphasized the importance of reengagement with the international community to support economic sustainability and address the humanitarian crisis.",
    "Fiscal policy:",
    "Monetary policy and exchange rate:",
    "Financial sector:",
    "Governance and reengagement:",
    "Real GDP growth (annual percentage change):",
    "Nominal GDP (US$ millions):",
    "Nominal GDP (ZWL millions):",
    "GDP deflator:",
    "CPI (annual average):",
    "CPI (end-of-period):",
    "Money supply (M2) (annual percentage change):",
    "Credit to the private sector (annual percentage change):",
    "Credit to the central government (annual percentage change):",
    "ZWL: USD exchange rate (annual average):",
    "Nominal central government (percent of GDP):",
    "Balance of payments (US$ millions):",
    "Gross international reserves (US$ millions):",
    "Months of imports of goods and services:",
    "Public debt:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://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/)",
    "[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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