Zimbabwe’s economy is expected to grow by only 2% this year because of the devastating drought this year but it will recover strongly to 6% next year because of a rebound in agriculture and capital projects in manufacturing, the International Monetary Fund says.
In a statement following a mission visit that ended yesterday, the IMF said it welcomed the improvement in monetary policy discipline and recommends further refinements to the policy framework.
“Price stability would be best achieved by stabilising the ZiG nominal exchange rate against a suitable basket of currencies. This could be in turn accomplished by controlling base money growth: for now through unremunerated Non-Negotiable Certificates of Deposits (NNCDs), but over time through indirect (interest-rate-based) monetary instruments to increase the attractiveness of the new currency,” the IMF said.
“The exchange rate should be determined in a deeper market to provide relevant information in the decision regarding the monetary policy stance, which would require identifying and removing any remaining impediments to the functioning of the FX market to promote price discovery.”
Zimbabwe introduced a new currency in April which has so far managed to stand its ground against the greenback. This was after the Zimbabwe dollar had lost 260% of its value in the first three months of this year.
Below is the statement from the IMF mission:
IMF Staff Completes 2024 Article IV Mission to Zimbabwe
June 27, 2024
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 discussions and decision.
Harare: In light of new policy developments, an International Monetary Fund (IMF) staff team led by Mr. Wojciech Maliszewski conducted a second mission to Harare during June 18-27, 2024, to conclude the 2024 Article IV Consultation.
At the conclusion of the IMF mission, Mr. Maliszewski issued the following statement:
“Despite headwinds, Zimbabwe’s economy continues showing resilience. Growth is expected to decelerate to about 2 percent in 2024 (from 5.3 percent in 2023), as the country faces a devastating El Niño-induced drought. Higher import bills are also worsening the balance-of-payments outlook. But growth is expected to recover strongly in 2025 to about 6 percent, supported by a rebound in agriculture and ongoing capital projects in manufacturing.
“Against this background, the Reserve Bank of Zimbabwe (RBZ) introduced in April 2024 a new currency—the Zimbabwe Gold (ZiG). The ZiG official exchange rate has so far remained stable, ending a bout of macroeconomic instability in the first 3 months of the year (when the Zimbabwean dollar depreciated by about 260 percent). Assuming that macro-stabilization is sustained, cumulative inflation in the remainder of the year is projected at about 7 percent.
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