The International Monetary Fund (IMF) on Wednesday delivered a damning assessment of the Zimbabwean economy, saying the southern African nation was experiencing an economic and humanitarian crisis with 2020 economic growth projected at near zero.
“The economy contracted sharply in 2019, amplified by climate shocks that have crippled agriculture and electricity generation; the newly introduced ZWL$ has lost most of its value; inflation is very high; and international reserves are very low,” the Fund said in a statement received by TODAY NEWS AFRICA in Washington DC on Wednesday after the IMF Executive Board concluded its Article IV consultation with Zimbabwe On February 24, 2020.
“The climate shocks have magnified the social impacts of the fiscal retrenchment, leaving more than half of the population food insecure. With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing”.
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IMF said the new Zimbabwean government, which came to office following the 2018 elections, adopted an agenda focused on macro stabilization and reforms, supported by a Staff Monitored Program from the IMF, adopted in May 2019, but was now off-track as policy implementation has been mixed.
“Notable reforms include a significant fiscal consolidation that has helped reduce the monetary financing of the deficit, the introduction of the new domestic currency in February 2019, the creation of an interbank FX market, and the restructuring of the command agriculture financing model to a public-private partnership with commercial banks.
“However, uneven implementation of reforms, notably delays and missteps in FX and monetary reforms, have failed to restore confidence in the new currency. Reengagement with the international community continues to face delays,” IMF said.
It said the Zimbabwean government has yet to define the modalities and financing to clear arrears to the World Bank and other multilateral institutions, and to undertake reforms that would facilitate resolution of 1 Under Article IV of the IMF’s Articles of Agreement. The IMF holds bilateral discussions with members, usually every year.
“This continues to constrain Zimbabwe’s access to external official support. As a result, the authorities face a difficult balance of pursuing tight monetary policy to reduce very high inflation and prudent fiscal policy to address the macroeconomic imbalances and build confidence in the currency, while averting a crisis,” IMF said, adding that while the 2020 budget includes a significant increase in social spending, it is likely insufficient to meet the pressing social needs. Absent a scaling up of donor support, the risks of a deep humanitarian crisis are high.
To mitigate the crisis, Zimbabwe is required to make difficult policy choices.
IMF directors urged the authorities to make a concerted effort to ensure economic and social stability through the adoption of coordinated fiscal, monetary and foreign exchange policies, alongside with efforts to address food insecurity and serious governance challenges.
They emphasized the importance of reengagement with the international community to support efforts to achieve economic sustainability and address the humanitarian crisis.