## IMF Executive Board Concludes 2020 Article IV Consultation with Zimbabwe

_IMF News, February 26, 2020_

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## Bibliographic details
- Published: February 26, 2020

---

### Overview and context
- 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.

### Macroeconomic situation and outlook
- 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.

### Policy actions, reform progress, and reengagement
- 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:
  - significant fiscal consolidation that helped reduce monetary financing of the deficit;
  - introduction of the new domestic currency in February 2019;
  - creation of an interbank FX market;
  - restructuring of command agriculture financing model to a public-private partnership with commercial banks.
- 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:
  - Authorities have yet to define modalities and financing to clear arrears to the World Bank and other multilateral institutions;
  - Authorities have yet to undertake reforms to facilitate resolution of arrears with bilateral creditors.
- Continued constraints on access to external official support.

### Executive Board Assessment and recommendations
- 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:
  - Noted pervasive deficits despite 2019 fiscal tightening; deficits could be exacerbated by humanitarian response needs.
  - Called for non-essential spending cuts, including decisive reforms to agricultural support programs, to allow for social spending needs.
  - Underscored the importance of public financial management and enhanced domestic revenue mobilization.
- Monetary policy and exchange rate:
  - Stressed that eliminating deficit monetization is crucial for fiscal sustainability and stabilization of hyper‑inflation and preservation of the currency’s external value.
  - 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.
  - Agreed that given low reserves and hyper‑inflation, limited credibility, and lack of access to traditional external financing, a monetary targeting regime is appropriate.
  - Recommended enhancing central bank independence and transparency, including timely publication of monetary statistics.
- Financial sector:
  - Welcomed progress on financial innovation, supervision and inclusiveness indicators.
  - 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.
- Governance and reengagement:
  - 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.
  - Noted such efforts would be instrumental to advance reengagement and mobilize needed support.
  - 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.

### Key statistics and projections (selected)
- Real GDP growth (annual percentage change):
  - 2016: 0.7
  - 2017: 4.7
  - 2018: 3.5
  - 2019: -8.3
  - 2020 (Prel): 0.8
- Nominal GDP (US$ millions):
  - 2016: 20,549
  - 2017: 22,041
  - 2018: 22,946
  - 2019: 20,703
  - 2020: 20,563
- Nominal GDP (ZWL millions):
  - 2016: 20,806
  - 2017: 27,438
  - 2018: 42,468
  - 2019: 156,165
  - 2020: 390,666
- GDP deflator:
  - 2016: 26.0
  - 2017: 49.5
  - 2018: 300.9
  - 2019: 148.1
- CPI (annual average):
  - 2016: -1.6
  - 2017: 0.9
  - 2018: 10.6
  - 2019: 255.3
  - 2020: 221.1
- CPI (end-of-period):
  - 2016: -0.9
  - 2017: 3.4
  - 2018: 42.1
  - 2019: 521.1
  - 2020: 52.0
- Money supply (M2) (annual percentage change):
  - 2016: 18.8
  - 2017: 39.0
  - 2018: 24.0
  - 2019: 127.5
  - 2020: 24.4
- Credit to the private sector (annual percentage change):
  - 2016: -3.9
  - 2017: 5.9
  - 2018: 9.1
  - 2019: 174.1
  - 2020: 56.7
- Credit to the central government (annual percentage change):
  - 2016: 51.6
  - 2017: 74.5
  - 2018: 59.2
  - 2019: 62.3
  - 2020: 27.5
- ZWL: USD exchange rate (annual average):
  - 2016: 1.0
  - 2017: 1.3
  - 2018: 2.0
  - 2019: 8.5
  - 2020: …
- Nominal central government (percent of GDP):
  - Revenue and grants:
    - 2016: 14.1
    - 2017: 12.9
    - 2018: 13.5
    - 2019: 12.8
  - Expenditure and net lending:
    - 2016: 23.9
    - 2017: 18.6
    - 2018: 16.9
    - 2019: 17.8
  - Of which: Employment costs:
    - 2016: 15.5
    - 2017: 12.7
    - 2018: 9.3
    - 2019: 4.9
    - 2020: 4.3
  - Of which: Capital transfers and net lending:
    - 2016: 4.1
    - 2017: 5.8
    - 2018: 5.0
    - 2019: 3.3
    - 2020: 4.0
  - Overall balance:
    - 2016: -7.1
    - 2017: -9.9
    - 2018: -5.7
    - 2019: -3.4
    - 2020: -5.0
  - Primary balance:
    - 2016: -6.4
    - 2017: -9.0
    - 2018: -4.8
    - 2019: -3.0
    - 2020: -4.6
- Balance of payments (US$ millions):
  - Exports of goods and services:
    - 2016: 4,060
    - 2017: 4,734
    - 2018: 5,304
    - 2019: 4,634
    - 2020: 5,038
  - Exports annual percentage change:
    - 2016: 1.5
    - 2017: 16.6
    - 2018: 12.1
    - 2019: -12.6
    - 2020: 8.7
  - Imports of goods and services:
    - 2016: 6,427
    - 2017: 6,555
    - 2018: 7,617
    - 2019: 5,455
    - 2020: 6,417
  - Imports annual percentage change:
    - 2016: -14.4
    - 2017: 16.2
    - 2018: -28.4
    - 2019: 17.7
  - Current account balance (excluding official transfers) (US$ millions):
    - 2016: -718
    - 2017: -284
    - 2018: -1,229
    - 2019: 155
    - 2020: -204
  - Current account balance (percent of GDP):
    - 2016: -3.5
    - 2017: -1.3
    - 2018: -5.4
    - 2019: -1.0
- Gross international reserves (US$ millions):
  - 2016: 310
  - 2017: 293
  - 2018: 87
  - 2019: 111
  - 2020: 109
- Months of imports of goods and services:
  - 2016: 0.6
  - 2017: 0.5
  - 2018: 0.1
  - 2019: 0.2
  - 2020: (not separately listed)
- Public debt:
  - Consolidated public sector debt (e.o.p.) (US$ millions):
    - 2016: 10,089
    - 2017: 11,998
    - 2018: 14,459
    - 2019: 10,372
    - 2020: 11,082
  - Consolidated public sector debt (percent of GDP):
    - 2016: 49.1
    - 2017: 54.4
    - 2018: 44.2
    - 2019: 50.1
    - 2020: 53.9
  - Public and publicly guaranteed external debt (e.o.p.) (US$ millions):
    - 2016: 7,997
    - 2017: 8,829
    - 2018: 8,672
    - 2019: 9,865
    - 2020: 10,591
  - Public and publicly guaranteed external debt (percent of GDP):
    - 2016: 38.9
    - 2017: 40.1
    - 2018: 37.8
    - 2019: 47.6
    - 2020: 51.5
  - Of which: Arrears (US$ millions):
    - 2016: 5,157
    - 2017: 5,652
    - 2018: 6,109
    - 2019: 6,284
    - 2020: 6,421
  - Arrears (percent of GDP):
    - 2016: 25.1
    - 2017: 25.6
    - 2018: 26.6
    - 2019: 30.4
    - 2020: 31.2

*IMF Communications Department, Press Release No. 20/72, February 26, 2020.*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2020/02/26/pr2072-zimbabwe-imf-executive-board-concludes-2020-article-iv-consultation_