IMF warns Zimbabwe that excessive government spending could worsen cash crisis

The financial sector should restore its role of intermediating resources in the economy by channeling deposits to productive credit rather than financing fiscal operations.

“The team recommends taking action to unleash the potential of the private sector and ensure that growth benefits the most vulnerable segments of the population,” Coronel said.

“Building on the progress already achieved, the government is encouraged to demonstrate that Zimbabwe is open for business.

“This will include enhancing efforts to tackle corruption, encouraging private sector investment, allowing the market to determine prices, promoting labor flexibility, and creating a stable legal and regulatory framework to reduce policy uncertainty.

“Moreover, there is room for enhancing domestic revenue mobilization, boosting transparency in the mining sector, and improving governance in public enterprises to strengthen the country’s fiscal position.”

Full IMF statement:

IMF Staff Completes 2017 Article IV Visit to Zimbabwe

May 15, 2017

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

The economy is facing difficulties as a severe drought and slow reform momentum have led to high expenditure levels since late 2015, despite subdued revenues.

Spending pressures stem from high employment costs, government transfers to support specific economic sectors, and elevated discretionary expenditure.

The team recommends taking action to unleash the potential of the private sector and ensure that growth benefits the most vulnerable segments of the population.

An International Monetary Fund (IMF) team led by Ana Lucía Coronel visited Zimbabwe from May 2 to 13, 2017, to hold discussions with the national authorities, private sector representatives, and civil society in the context of the 2017 Article IV Consultations. The discussions covered recent economic developments, the outlook and risks, as well as policies that could restore economic stability.

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