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IMF commends Govt for fiscal reforms

THE International Monetary Fund (IMF) says Zimbabwe’s economy would continue to recover in 2021, reaffirming its assertion of a six percent expansion driven by increased investments in key economic sectors.

This follows preliminary findings by an IMF staff team led by Dhaneshwar Ghura, Mission Chief for Zimbabwe, after concluding Article IV Mission to Zimbabwe through virtual meetings from October 25 to November 16, 2021.

During the visit, Mr Ghura held discussions with Minister of Finance and Economic Development Professor Mthuli Ncube, secretary for finance George Guvamatanga, the Reserve Bank of Zimbabwe Governor John Mangudya and senior Government and RBZ officials, members of Parliament, representatives of the private sector and civil society and Zimbabwe’s development partners.

The IMF praised the Zimbabwean administration on being able to tackle budget deficits and reserve money growth as a way to contain inflationary pressures.

“The IMF mission notes the authorities’ significant efforts to stem inflationary pressures. In this regard, contained budget deficits and reserve money growth, higher monetary policy rates, and more flexibility in the RBZ auction exchange rate, are policy measures in the right direction,” Mr Ghura said.

The IMF official said the envisaged GDP growth reflected a bumper agricultural output, increased mining and energy production, buoyant construction and manufacturing activity, and increased infrastructure.

In June this year the IMF said Zimbabwe is on a path to economic recovery with a growth forecast of six largely due to a bumper harvest of maize.

Treasury revised upwards the economic growth projections to at least 7,8 percent this year, compared to the previously projected 7,4 percent. This was on the back of a stellar 2020/21 agricultural season, higher international commodity prices, stable macro-economic environment, and a well-managed Covid-19 pandemic.

The World Bank has projected that Zimbabwe’s economy will expand by 3,9 percent in 2021 following significant decline induced by Covid-19 last year and the devastating Cyclone Idai in 2019.

The World Bank also shares similar strong growth sentiment about Zimbabwe and said earlier economic growth this year will be led by recovery of agriculture.

Mr Ghura noted that Zimbabwe’s swift response to the Covid-19 pandemic, including through containment measures and support to vulnerable households and firms, helped mitigate its adverse impact.

He noted, however, that the pandemic and other factors had taken a severe toll on the economic and humanitarian situation in Zimbabwe over the past two years.

Mr Ghura said decisive actions are needed to lock in economic stabilisation gains and accelerate reforms. He said the near-term macroeconomic imperative is to continue with the close coordination among fiscal, exchange rate, and monetary policies.

Mr Ghura said that the reforms were critical to improve the business climate and reducing governance vulnerabilities, thus foster higher sustained and inclusive growth.

The mission noted the authorities’ plans to use the recent special drawing (SDR) allocation to support spending in social, productive, and infrastructure sectors, as well as building reserve buffers.

The IMF noted that Zimbabwe would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and obtaining financing assurances from creditors; a reform plan that is consistent with macroeconomic stability, sustainable growth, and poverty reduction; a reinforcement of the social safety net; and governance and transparency reforms in order to access a Fund financial arrangement.

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