IMF says the premium on the back market at 30% is too high- outlines 3 key reforms

“Key economic policy reforms identified in previous Article IV consultations remain paramount to fully restore macroeconomic stability. First, comprehensively addressing the RBZ’s quasi- fiscal operations (QFOs) remains imperative to mitigate liquidity pressures and thus re-anchor inflation expectations. These measures should be complemented with an enhanced liquidity management framework, including through the use of appropriate interest-bearing instruments by the RBZ to mop up excess liquidity. Second, the consolidated fiscal stance, including QFOs, should be aligned with the short-term stabilization objectives. Third, there is an urgent need to accelerate the FX market reform, by allowing more flexibility in the official exchange rate through a more transparent and market-driven price discovery; removing the restrictions on the exchange rate at which banks, authorized dealers, and businesses can transact; and further minimizing export surrender requirements.

“Structural reforms aimed at improving the business climate and reducing governance vulnerabilities are key for promoting sustained and inclusive growth and would bode well for supporting Zimbabwe’s development objectives embodied in the country’s National Development Strategy 1 (2021-2025).

“Sustainable development will also require a resolution of debt overhang. The Fund continues to provide policy advice and extensive technical assistance in the areas of revenue mobilization, expenditure control, financial supervision, debt management, economic governance, and macroeconomic statistics. However, the IMF is precluded from providing financial support to Zimbabwe due to unsustainable debt—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears. A Fund 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. International reengagement remains critical for debt resolution and access to financial support. In this regard, the authorities’ reengagement efforts—through the Structured Dialogue Platform—are well noted and are vital for attaining debt sustainability and gaining access to external financing.

“The outcome of this staff visit will serve as a key input in the preparations for a Staff Monitored Program (SMP) and the next Article IV consultation.

“The IMF mission held meetings with Minister of Finance, Economic Development and Investment Promotion Hon. Professor Mthuli Ncube, his Permanent Secretary Mr. George Guvamatanga, the Reserve Bank of Zimbabwe Governor Dr. John Mangudya, the Deputy Chief Secretary to the President and Cabinet Mr. Willard Manungo, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.”

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