Press Release No. 23/361

IMF Staff Concludes Staff Visit to Zimbabwe

October 25, 2023

Harare: An International Monetary Fund (IMF) staff team led by Wojciech Maliszewski conducted a staff visit in Harare during October 18–25, 2023 to discuss recent economic developments and the economic outlook.

At the conclusion of the IMF mission visit, Mr. Maliszewski issued the following statement:

“Zimbabwe’s economy has continued its post-COVID recovery, but enhancing its longer-term growth potential would require strong reform efforts. Real GDP is projected to grow by around 4.8 percent in 2023, supported by strong activity in the mining sector and—reflecting the beneficial impact of structural reforms—in agriculture and energy sectors. Growth is expected to slow to 3.5 percent in 2024 due to weaker global demand for minerals and a weather- related slowdown in agriculture. As external conditions worsen, the economic outlook will even more crucially depend on progress toward macroeconomic stabilization and transformational structural reforms. Local-currency (ZWL) inflation and exchange rate pressures have abated in recent months, following significant price increases and exchange rate depreciation in the second quarter of 2023. The IMF mission notes the authorities’ recent efforts into stabilizing the foreign exchange market and lowering inflation through the tightening of ZWL liquidity conditions. The mission welcomes the removal of surrender requirements on domestic sales in FX. The announced plan for the transfer of RBZ FX liabilities to the Treasury is also welcome. Nevertheless, the parallel FX market premium is large at above 30 percent, and ZWL inflation remains high. The fiscal deficit, excluding QFOs, is projected at 2.3 percent of GDP in 2023.

“Key economic policy reforms identified in previous Article IV consultations remain paramount to fully restore macroeconomic stability. First, comprehensively addressing the RBZ’s quasi- fiscal operations (QFOs) remains imperative to mitigate liquidity pressures and thus re-anchor inflation expectations. These measures should be complemented with an enhanced liquidity management framework, including through the use of appropriate interest-bearing instruments by the RBZ to mop up excess liquidity. Second, the consolidated fiscal stance, including QFOs, should be aligned with the short-term stabilization objectives. Third, there is an urgent need to accelerate the FX market reform, by allowing more flexibility in the official exchange rate through a more transparent and market-driven price discovery; removing the restrictions on the exchange rate at which banks, authorized dealers, and businesses can transact; and further minimizing export surrender requirements.

“Structural reforms aimed at improving the business climate and reducing governance vulnerabilities are key for promoting sustained and inclusive growth and would bode well for supporting Zimbabwe’s development objectives embodied in the country’s National Development Strategy 1 (2021-2025).

“Sustainable development will also require a resolution of debt overhang. The Fund continues to provide policy advice and extensive technical assistance in the areas of revenue mobilization, expenditure control, financial supervision, debt management, economic governance, and macroeconomic statistics. However, the IMF is precluded from providing financial support to Zimbabwe due to unsustainable debt—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears. 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 durably restoring macroeconomic stability, enhancing inclusive growth, lowering poverty, and strengthening economic governance. International reengagement remains critical for debt resolution and access to financial support. In this regard, the authorities' reengagement efforts—through the Structured Dialogue Platform—are well noted and are vital for attaining debt sustainability and gaining access to external financing.

“The outcome of this staff visit will serve as a key input in the preparations for a Staff Monitored Program (SMP) and the next Article IV consultation.

“The IMF mission held meetings with Minister of Finance, Economic Development and Investment Promotion Hon. Professor Mthuli Ncube, his Permanent Secretary Mr. George Guvamatanga, the Reserve Bank of Zimbabwe Governor Dr. John Mangudya, the Deputy Chief Secretary to the President and Cabinet Mr. Willard Manungo, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.

“The IMF staff wishes to express its gratitude to the Zimbabwean authorities and stakeholders for the constructive and open discussions and support during the mission.”