IMF offers no solution to Zimbabwe’s economic woes

The International Monetary Fund has virtually offered no solution to Zimbabwe’s economic woes, saying it can only provide policy advice and extensive technical assistance in the areas of revenue mobilisation, expenditure control, financial supervision, debt management, economic governance, as well as macroeconomic statistics. 

It is currently precluded from providing financial support to Zimbabwe due to the country’s 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 that is consistent with durably restoring macroeconomic stability; enhancing inclusive growth; lowering poverty; and strengthening economic governance,” the IMF said.

Zimbabwe’s debt is estimated at US$21 billion with US$13 billion in external debt and a domestic debt of US$8 billion.

An IMF team led by Wojciech Maliszewski was in the country from 30 January to 13 February on a mission to advance discussion on the Staff-Monitored Programme which was requested by Zimbabwe in 2023.

The team held meetings with the Minister of Finance, Economic Development and Investment Promotion Mthuli Ncube, his Permanent Secretary George Guvamatanga; the Reserve Bank of Zimbabwe Governor John Mushayavanhu; the Chief Secretary to the President and Cabinet Martin Rushwaya, other senior government and RBZ officials, Members of Parliament, representatives of the private sector, civil society, and Zimbabwe’s development partners.

It issued the following statement after its mission:

Zimbabwe’s economic activity has started recovering after the El Niño-induced drought. Growth slowed from 5.3 percent to an estimated 2 percent in 2024, as the drought lowered agricultural output by 15 percent. This was compounded by reduced electricity production and declining prices for key mineral exports (platinum and lithium). 

That said, strong remittances continued supporting activity in domestic trade, services, and construction, and improved the current account surplus to an estimated US$500 million (1.4 percent of GDP) in 2024. The ZiG willing-buyer willing-seller (WBWS) exchange rate was stable from the ZiG’s introduction in April 2024—with the ZiG month-on-month inflation averaging 2.3 percent—until September, when the currency weakened. 

Relative stability returned with the tightening of monetary policy since September, and the WBWS and parallel market exchange rates have stabilized, and the gap between these rates has narrowed. Meanwhile, fiscal pressures intensified—owing, in large part, to the transfer of the RBZ’s quasi-fiscal operations to the Treasury. 

Strong revenue collection helped limit the 2024 budget deficit to an estimated 1 percent of GDP, but fiscal pressures resulted in an accumulation of domestic expenditure arrears, leading to the government implementing emergency spending cuts. 

Going forward, growth in 2025 is projected to increase to 6 percent, with the recovery in agriculture output due to better climate conditions and the projected improvement in the terms-of-trade.

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