In January-February 2024, the IMF mission led by Mr. Wojciech Maliszewski assessed Zimbabwe’s request for a Staff-Monitored Program (SMP). Economic growth is recovering, despite setbacks from drought and inflation. The SMP aims to stabilize the economy, enhance fiscal policies, and encourage international debt resolution. Challenges persist, especially regarding external debt pressures.
The International Monetary Fund (IMF) completed a mission in Harare from January 30 to February 13, 2024, to assess Zimbabwe’s request for a Staff-Monitored Program (SMP) to stabilize its economy. The staff, led by Mr. Wojciech Maliszewski, observed that economic recovery is underway following a drought-driven decline in growth, dropping to an estimated 2 percent this year.
The El Niño drought resulted in a 15 percent decrease in agricultural production. Coupled with weakened electricity supply and falling prices in important mineral sectors, growth significantly declined from 5.3 to 2 percent in 2024. However, increased remittances have supported trade and construction, contributing to a current account surplus of about US$500 million (1.4% of GDP).
Zimbabwe’s exchange rate showed stability right after the introduction of the ZiG in April 2024, averaging 2.3 percent inflation monthly until a currency depreciation in September. Monetary policy tightening restored relative stability, reducing the gap between the official and parallel market rates, but fiscal pressures arose from transfers related to the Reserve Bank of Zimbabwe’s operations.
Despite effective revenue collection limiting the 2024 budget deficit to 1 percent of GDP, the government incurred domestic expenditure arrears necessitating emergency cuts. Projections for 2025 indicate a GDP growth increase to 6 percent due to improved agricultural output linked to favorable climate conditions.
An SMP is sought to stabilize the economy and facilitate international re-engagement for arrears and debt resolution. Objectives include ensuring macroeconomic stability through fiscal adjustments, addressing off-budget fiscal risks, enhancing the monetary policy framework, and reforming economic governance.
Debt resolution and arrears clearance are critical for obtaining external financing. The IMF indicated that ongoing cooperation through the Structured Dialogue Platform (SDP) is essential for achieving debt sustainability and gaining concessional financial support.
Despite the IMF’s provision of technical assistance in various economic areas, financial support is currently unavailable due to Zimbabwe’s unsustainable debt levels and external arrears. An eventual financial arrangement requires comprehensive restructuring of the external debt and a reform strategy conducive to stabilizing the economy.
The IMF mission to Zimbabwe highlighted ongoing fiscal and economic challenges while recognizing potential growth opportunities. The proposal for a Staff-Monitored Program (SMP) aims to enhance macroeconomic stability, ensure fiscal accountability, and facilitate international engagement for resolving debt issues. The key to future financial aid lies in achieving debt sustainability and necessary reforms to foster economic growth.
Original Source: www.miragenews.com
