Feb 14, 2025 (The Herald/All Africa Global Media via COMTEX) --
The International Monetary Fund (IMF) has said Zimbabwe's economy has started recovering from the effects of the El Nino-induced drought, amid growing stability anchored by the central bank's tight monetary policy stance.
This comes after an IMF team, led by Mr Wojciech Maliszewski, which conducted a staff mission to Harare from January 30 to February 13, 2025, concluded engagements with Government officials and key stakeholders on Zimbabwe's Staff Monitored Programme (SMP).
Mr Maliszewski, in a statement after the mission, said Zimbabwe's economic growth slowed from 5,3 percent to an estimated 2 percent in 2024, after the drought lowered agricultural output by 15 percent.
"This was compounded by reduced electricity production and declining prices for key mineral exports such as platinum and lithium.
"That said, strong remittances continued supporting activity in domestic trade, services, and construction and improved the current account surplus to an estimated US$500 million, which is 1,4 percent of GDP in 2024," he said.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube projected in the 2025 National Budget that the economy will grow by 6 percent this year, driven by normal to above-normal rainfall, which will boost agricultural output.
The minister is optimistic about the country's economic prospects, saying it can also capitalise on emerging energy minerals to sustain economic momentum, and he emphasised the importance of maintaining the tight monetary stance, which has yielded positive results in supporting the value of the ZiG and ensuring fiscal discipline with controlled budget deficits.
The IMF noted that the ZiG willing-buyer willing-seller (WBWS) exchange rate was stable since the currency's introduction in April 2024, with the local currency monthly inflation averaging 2,3 percent until September, 2024 when the currency weakened substantially following its devaluation by the central bank.
The devaluation was designed to correct price distortions arising from formal and open market exchange rate disparities.
"Relative stability returned with the tightening of monetary policy since September, and the WBWS and parallel market exchange rates have stabilised, and the gap between these rates has narrowed," said Mr Maliszewski.
Zimbabwe is also maintaining a tight fiscal policy thrust, limiting unnecessary public spending and expanding the fiscal base to control inflation and stabilise the local currency.
The Reserve Bank of Zimbabwe (RBZ) has also reaffirmed its commitment to a tight monetary stance, maintaining the bank policy rate at 35 percent and statutory reserve ratios at 30 percent and 15 percent for current accounts and savings as well as time deposits, respectively, across both ZiG and US dollar holdings.
Meanwhile, the IMF said fiscal pressures intensified owing, in large part, to the transfer of the RBZ's quasi-fiscal operations to the Treasury. Mr Maliszewski said strong revenue collection helped limit the 2024 budget deficit to an estimated 1 percent of GDP, but fiscal pressures resulted in an accumulation of domestic expenditure arrears, leading to the Government implementing emergency spending cuts.
"Going forward, growth in 2025 is projected to increase to 6 percent, with the recovery in agriculture output due to better climate conditions and the projected improvement in the terms of trade.
"Against this background, the Zimbabwe authorities had requested an SMP to support their efforts to stabilise the economy and re-engage with the international community on the arrears clearance and debt resolution process.
"The main objective of the SMP would be to durably anchor macroeconomic stability, building on policy recommendations from the 2024 Article IV consultation," he said.
The IMF official added that building on the progress achieved during the mission on the ongoing SMP discussions, the fund's staff would continue working closely with the authorities on defining the key parameters and modalities of the programme.
Mr Maliszewski said discussions included adjusting the fiscal position to avoid recourse to monetary financing and new arrears and building foundations for a durable fiscal consolidation, fiscal risks residing off-budget, including from the operations of the Mutapa Investment Fund.
Focus will also be on the effectiveness of the monetary policy framework for the ZiG and reforms to strengthen economic governance.
"International re-engagement remains critical for debt resolution and arrears clearance, which would open the door for access to external financing.
"The authorities' re-engagement efforts, through the Structured Dialogue Platform (SDP), are key for attaining debt sustainability and gaining access to concessional financial support.
"In this context, the SMP will help in enhancing policy credibility and advancing the reform agenda embedded in the SDP," said Mr Maliszewski.
In December 2022, the Government launched SDP for dialogue on arrears clearance, as the country's debt has been constraining its ability to pursue development initiatives.
Implementation of the debt reforms is being spearheaded by the sector working group's (SWG) task of focusing discussions on the Government's implementation of reforms under the three key strategic pillars.
These include economic growth and stability reforms; governance reforms and land tenure reforms; compensation for former farm owners (FFOs); and the resolution of Bilateral Investment Protection and Promotion Agreements (BIPPAs). The African Development Bank (AfDB) president, Dr Akinwumi Adesina, was appointed by President Mnangagwa in 2023 to be the champion of Zimbabwe's debt resolution process, while former Mozambique President, Joaquim Chissano, was designated high-level facilitator.
COMTEX_462771302/2029/2025-02-14T03:31:11
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