THE International Monetary Fund (IMF) has said Zimbabwe’s macroeconomic environment is expected to remain challenging in 2014 with the outlook could see moderate growth.
An IMF delegation led by Alfredo Cuevas visited Zimbabwe to hold discussions on the 2014 Article IV Consultation and the combined first and second reviews under the Staff-Monitored Program (SMP).
In its statement Thursday, the team concluded that Zimbabwe’s economic environment remains challenging.
“Achieving Zimbabwe’s fuller growth potential over the medium term depends on pursuing strong macroeconomic policies, including building up fiscal and external buffers and increasing budgetary resources going to non-personnel related spending.
“… and implementing structural reforms to foster investment, improve the business climate, and strengthen governance and institutions, including increasing the transparency of the minerals regime,” read the statement in part.
The IMF team said it held “productive discussions” with Zimbabwe’s chief secretary in the Office of the President and Cabinet, Misheck Sibanda, Finance Minister Patrick Chinamasa and Mining Minister Walter Chidhakwa.
They also met Indigenization Minister Francis Nhema, Advisor to the President Timothy Stamps, acting Governor of the Reserve Bank of Zimbabwe (RBZ) Charity Dhliwayo, and other senior government officials.
“It will also be necessary to engage with the country’s creditors to work towards a solution to the long-standing debt arrears problem. Downside risks to the outlook include the possibility of further weakening of export prices, a tightening of external financing conditions, as well as risks related to policy implementation delays,” said IMF.
Discussions with government officials covered recent economic developments and the near and medium-term outlook and risks for Zimbabwe.
They also focussed on implementation of the policies and reforms under the SMP; and implementation of other policies to restore fiscal and external sustainability, enhance financial sector stability, and unlock the country’s potential for sustained growth and poverty reduction.
“Should these risks materialize, they would adversely impact output growth and fiscal revenue. To mitigate these risks, it is important to strengthen fiscal policy, identify potential sources of domestic and foreign financing, and address financial sector vulnerabilities.”Advertisement
The IMF said in recent years Zimbabwe’s economy had expanded following more than a decade of decline that culminated in hyperinflation; but the rebound phase of its recovery is over.
“Growth decelerated in 2013, reflecting the impact of adverse weather conditions, weak prices for key exports, competitive pressures, low liquidity, and election-year uncertainty.”
Real GDP in 2013 is estimated at just above three percent, sharply down from 10,5 percent in 2012.
The 12-month inflation rate decelerated from 2,9 percent end-2012 to 0,3 percent at end-2013 (and further -0,5 percent in February 2014), reflecting weak domestic demand and the depreciating South African rand.
The external account deficit widened in 2013, and reserves remain significantly below adequate levels. Fiscal policy in 2013 was challenged by election-related spending pressures and higher-than-budgeted employment costs.
The IMF said it was committed to supporting the Zimbabwean authorities’ efforts to implement stronger macroeconomic policies, including through targeted technical assistance and capacity building activities.
“In order to enhance its interactions with Zimbabwe, the IMF intends to place a Resident Representative in Harare in the coming months,” read the statement.