IMF Staff Concludes Staff Visit to Zimbabwe

IMF News, September 19, 2022

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IMF staff team led by Dhaneshwar Ghura conducted a staff visit in Harare during September 12–19, 2022 to discuss recent economic developments and the economic outlook.
End-of-Mission press release issued September 19, 2022. The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
IMF staff held meetings with Minister of Finance and Economic Development Hon. Professor Mthuli Ncube, Permanent Secretary Mr. George Guvamatanga, Reserve Bank of Zimbabwe Governor Dr. John Mangudya, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.

Inflation in August reached 285 percent over a year earlier.
Real GDP growth:
- About 7 percent in 2021.
- Expected to decline to about 3½ percent in 2022, reflecting a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability, amidst a recovery in mining and tourism.
Recent shocks cited: Russia’s war in Ukraine, poor rainfall, price pressures, and ongoing effects of the COVID-19 pandemic.
Renewed price and exchange rate depreciation pressures emerged, notably in the second quarter of 2022.
Narrowing of the parallel market exchange rate gap attributed in part to recent tightening of monetary policy and contained budget deficits.

Authorities have undertaken efforts to stabilize the local foreign exchange market and lower inflation.
Recent policy actions noted as "in the right direction":
- Tightening of monetary policy.
- Contained budget deficits.
The RBZ’s quasi-fiscal operations identified as needing transfer to the budget to enhance transparency, improve monetary and exchange rate policy conduct, and enhance central bank independence.

Near-term macroeconomic imperative: curb inflationary pressures by further tightening monetary policy, as needed.
Allow greater exchange rate flexibility through:
- A more transparent and market-driven price discovery process.
- Tackling FX market distortions.
- Eliminating exchange restrictions.
Transfer RBZ quasi-fiscal operations to the budget to enhance transparency and central bank independence.
Structural reforms priorities:
- Improve the business climate.
- Reduce governance vulnerabilities.
- Strengthen governance and transparency reforms.
Strengthen and reinforce the social safety net as part of a reform plan consistent with macroeconomic stability, growth and poverty reduction.

Zimbabwe has been a Fund member in good standing since it cleared its outstanding arrears to the IMF in late 2016.
The IMF is precluded from providing financial support to Zimbabwe due to unsustainable debt and official external arrears.
Preconditions for a Fund financial arrangement include:
- A clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears.
- A reform plan consistent with macroeconomic stability, growth and poverty reduction.
- Reinforcement of the social safety net.
- Governance and transparency reforms.
International reengagement is described as critical for debt resolution and access to financial support.

Uncertainty remains high; the outlook depends on the evolution of external shocks, the policy stance, and implementation of inclusive growth-friendly policies.
Durable macroeconomic stability and structural reforms would support Zimbabwe’s development objectives as embodied in the country’s National Development Strategy 1 (2021-2025).
The outcome of the IMF staff visit will serve as a key input in preparations for the next Article IV consultation mission.

IMF Press Release No. 22/310, September 19, 2022.