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The International Monetary Fund (IMF) logo at a meeting in 2018. Image: REUTERS/Johannes P. Christo/File Photo

IMF calls for debt resolution and structural reforms in Zimbabwe

HARARE – The International Monetary Fund (IMF) has praised Zimbabwe’s economic recovery from the COVID-19 pandemic, but warned that the country needs to implement strong reforms to boost its growth potential and resolve its debt problems.

An IMF team visited Harare from October 18 to 25, 2023, to discuss the economic situation and outlook with the authorities. The team leader, Wojciech Maliszewski, said in a statement that Zimbabwe’s real GDP is expected to grow by around 4.8 percent in 2023, driven by strong performance in the mining, agriculture and energy sectors. However, he added that growth will slow down to 3.5 percent in 2024 due to weaker global demand for minerals and a weather-related slowdown in agriculture.

Maliszewski noted that inflation and exchange rate pressures have eased in recent months, thanks to the authorities’ efforts to stabilize the foreign exchange market and tighten liquidity conditions. He also welcomed the removal of surrender requirements on domestic sales in foreign currency and the plan to transfer the central bank’s foreign exchange liabilities to the Treasury.

However, he stressed that key economic policy reforms remain essential to fully restore macroeconomic stability. These include addressing the central bank’s quasi-fiscal operations, which create liquidity pressures and fuel inflation expectations; aligning the fiscal stance with the stabilization objectives; and accelerating the foreign exchange market reform, by allowing more flexibility in the official exchange rate and removing the restrictions on the exchange rate transactions.

Maliszewski also emphasized the importance of structural reforms to improve the business climate and reduce governance vulnerabilities, which are key for promoting sustained and inclusive growth. He said that these reforms would support Zimbabwe’s development objectives embodied in its National Development Strategy 1 (2021-2025).

He added that sustainable development will also require a resolution of debt overhang, which prevents the IMF from providing financial support to Zimbabwe. He said that 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 restoring macroeconomic stability, enhancing inclusive growth, lowering poverty, and strengthening economic governance. He noted that international reengagement remains critical for debt resolution and access to financial support. He commended the authorities’ reengagement efforts through the Structured Dialogue Platform.