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IMF commends Zimbabwe economic resilience

THE International Monetary Fund (IMF) says Zimbabwe’s economy continues to show resilience in the face of inflationary pressures after the country’s Gross Domestic Product grew by an estimated 5,3 percent last year.

Speaking during a press briefing at the end of the IMF 2024 Article IV Mission to Zimbabwe in Harare yesterday, head of delegation Mr Wojciech Maliszewski said Zimbabwe’s resilience was on the back of economic expansion in mining and agriculture, some of the key sectors of the economy.

The IMF delegation has been in the country since January 31, 2024.

“Economic activity in Zimbabwe continues to show resilience in the face of currency instability and high inflation. We estimate our growth to be around 5,3 percent of the GDP in the previous year which is pretty much aligned with the authorities’ expectations.

“The GDP growth is on the back of expansion in agriculture and mining, and buoyed by related foreign currency inflows and by remittances in the highly dollarised domestic trade and services,” he said.

Mining and agriculture are Zimbabwe’s economic mainstays expected to be the engines of the country’s economic growth towards upper-middle-income society status by 2030.

Mr Maliszewski said Zimbabwe has enormous natural resources and an abundant human capital base which if tapped, may even grow more robust.

“But even now, economic activity in the past year was very strong; what we see is very strong expansion in agriculture, mining but also in domestic services and trade.”

He said because a large portion of economic activity was in foreign currency, this was cushioning the economy from the impact of currency instability and high inflation.

However, Mr Maliszewski said the IMF projected that Zimbabwe’s GDP growth will slow down to about 3,25 percent this year on the back of the impact of the drought on agriculture production and lower commodity prices.

“These factors are also expected to reduce foreign currency inflows, but remittances will likely remain strong and the current account is projected to be in small surplus,” he said.

Mr Maliszewski described their latest mission as “exceptional” because of the excellent cooperation IMF had with authorities in the country.

“I would like to say that this mission was also exceptional because of the excellent cooperation that we had at the technical level and any level with the authorities and it was a very productive visit. This mission was a combined mission covering Article IV issues but also the beginning of our discussions of the Staff Monitored Programme.

“The SMP is a programme that is supposed to restore macro-economic stability and we are just advisors in this process. Our role is to be helpful as much as we can in terms of advising the Government and helping Zimbabwe to restore macro-economic stability that we consider a very important factor in terms of ensuring robust growth,” he said.

The Government has requested a new Staff Monitored Programme (SMP) to support Zimbabwe’s stabilisation efforts and re-engagement with the international community through building a track record of sound economic policies.

During their mission, he said key findings were both on the economic development side in terms of the policies discussed with the Ministry of Finance, Economic Development and Investment Promotion as well as the Reserve Bank of Zimbabwe.

“The discussions focused on restoring macro-economic stability and to this end, we discussed the recent transfer of the RBZ obligations related to quasi-fiscal operations to the Treasury. 

We also discussed steps towards liberalising the forex market but also potential changes in the exchange rate and monetary policy framework.

Earlier in his address, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said: “This press briefing is about the end of the Article IV mission of the IMF which seeks to again take stock of what’s happening on the economic front, what policies have been implemented and working, where do we need to do more and so forth (just to take stock on the state of the economy).

“But this mission is unique in the sense that it is also a tear-off Staff Monitored Programme scheduled for the future; already we have done some preliminary discussions on what that could look like.

“But the core it is about the state of the economy, various policy gaps and what still needs to be done.”

In a statement released by the IMF to mark the end of its 2024 Article IV Mission to Zimbabwe yesterday, the multilateral institution said drought and depressed commodity prices are also expected to reduce foreign currency inflows, but remittances will likely remain strong and the current account is projected to be in small surplus.

“This should support liquidity in the dollarised part of the economy, sustaining growth in domestic trade, services and construction.

“However, local currency instability intensified: the official exchange rate has depreciated by about 95 percent since the beginning of December 2023; the gap to the parallel market rate remains wide (above 30 percent); and Zimbabwe dollar inflation is still very high.

“This instability weighs on sentiment, while exchange rate restrictions (prescribing retailers to use the official ZWL exchange rate with up to a 10 percent margin — inflating US dollar prices) continue to be a burden on the formal sector.

“Risks remain skewed to the downside and the outlook will crucially depend on progress toward macroeconomic stabilisation and transformational structural reforms,” it said.

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