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THE International Monetary Fund (IMF) says Zimbabwe’s economy continues to show resilience in the face of inflationary pressures after the country’s Gross Domestic Product grew by an estimated 5,3 percent last year.

Speaking during a press briefing at the end of the IMF 2024 Article IV Mission to Zimbabwe in Harare yesterday, head of delegation Mr Wojciech Maliszewski said Zimbabwe’s resilience was on the back of economic expansion in mining and agriculture, some of the key sectors of the economy.

The IMF delegation has been in the country since January 31, 2024.

“Economic activity in Zimbabwe continues to show resilience in the face of currency instability and high inflation. We estimate our growth to be around 5,3 percent of the GDP in the previous year which is pretty much aligned with the authorities’ expectations.

“The GDP growth is on the back of expansion in agriculture and mining, and buoyed by related foreign currency inflows and by remittances in the highly dollarised domestic trade and services,” he said.

Mining and agriculture are Zimbabwe’s economic mainstays expected to be the engines of the country’s economic growth towards upper-middle-income society status by 2030.

Mr Maliszewski said Zimbabwe has enormous natural resources and an abundant human capital base which if tapped, may even grow more robust.

“But even now, economic activity in the past year was very strong; what we see is very strong expansion in agriculture, mining but also in domestic services and trade.”

He said because a large portion of economic activity was in foreign currency, this was cushioning the economy from the impact of currency instability and high inflation.

However, Mr Maliszewski said the IMF projected that Zimbabwe’s GDP growth will slow down to about 3,25 percent this year on the back of the impact of the drought on agriculture production and lower commodity prices.

“These factors are also expected to reduce foreign currency inflows, but remittances will likely remain strong and the current account is projected to be in small surplus,” he said.

Mr Maliszewski described their latest mission as “exceptional” because of the excellent cooperation IMF had with authorities in the country.

“I would like to say that this mission was also exceptional because of the excellent cooperation that we had at the technical level and any level with the authorities and it was a very productive visit. This mission was a combined mission covering Article IV issues but also the beginning of our discussions of the Staff Monitored Programme.

“The SMP is a programme that is supposed to restore macro-economic stability and we are just advisors in this process.

“Our role is to be helpful as much as we can in terms of advising the Government and helping Zimbabwe to restore macro-economic stability that we consider a very important factor in terms of ensuring robust growth,” he said.

The Government has requested a new Staff Monitored Programme (SMP) to support Zimbabwe’s stabilisation efforts and re-engagement with the international community through building a track record of sound economic policies.

During their mission, he said key findings were both on the economic development side in terms of the policies discussed with the Ministry of Finance, Economic Development and Investment Promotion as well as the Reserve Bank of Zimbabwe.

“The discussions focused on restoring macro-economic stability and to this end, we discussed the recent transfer of the RBZ obligations related to quasi-fiscal operations to the Treasury. We also discussed steps towards liberalising the forex market but also potential changes in the exchange rate and monetary policy framework.

Earlier in his address, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said: “This press briefing is about the end of the Article IV mission of the IMF which seeks to again take stock of what’s happening on the economic front, what policies have been implemented and working, where do we need to do more and so forth (just to take stock on the state of the economy).

“But this mission is unique in the sense that it is also a tear-off Staff Monitored Programme scheduled for the future; already we have done some preliminary discussions on what that could look like.

“But the core it is about the state of the economy, various policy gaps and what still needs to be done.”

In a statement released by the IMF to mark the end of its 2024 Article IV Mission to Zimbabwe yesterday, the multilateral institution said drought and depressed commodity prices are also expected to reduce foreign currency inflows, but remittances will likely remain strong and the current account is projected to be in small surplus.

“This should support liquidity in the dollarised part of the economy, sustaining growth in domestic trade, services and construction.

“However, local currency instability intensified: the official exchange rate has depreciated by about 95 percent since the beginning of December 2023; the gap to the parallel market rate remains wide (above 30 percent); and Zimbabwe dollar inflation is still very high.

“This instability weighs on sentiment, while exchange rate restrictions (prescribing retailers to use the official ZWL exchange rate with up to a 10 percent margin — inflating US dollar prices) continue to be a burden on the formal sector.

“Risks remain skewed to the downside and the outlook will crucially depend on progress toward macroeconomic stabilisation and transformational structural reforms,” it said.

• The mission discussions covered policies to restore macroeconomic stability and improve growth prospects, focusing on finalizing the transfer of the RBZ’s quasi-fiscal operations to the Treasury and addressing other sources of fiscal pressures; liberalizing the foreign exchange market and establishing an effective framework for exchange rate and monetary policies; and progressing on reforms to improve economic governance.

Harare: An International Monetary Fund (IMF) staff team led by Mr. Wojciech Maliszewski visited Harare on January 31-February 14, 2024, to discuss the authorities’ request for a Staff Monitored Program (SMP) and commence 2024 Article IV Consultation.

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

“Economic activity in Zimbabwe continues to show resilience in the face of currency instability and high inflation. GDP growth is estimated at 5.3 percent in 2023, on the back of an expansion in agriculture and mining, and—buoyed by related foreign currency inflows and by remittances—in the highly-dollarized domestic trade and services. Growth is expected to decelerate to about 3¼ percent in 2024, partly reflecting the impact of a drought on agriculture production and lower commodity prices. These factors are also expected to reduce foreign currency inflows, but remittances will likely remain strong, and the current account is projected to be in small surplus. This should support liquidity in the dollarized part of the economy, sustaining growth in domestic trade, services, and construction. However, local-currency (ZWL) instability intensified: the official exchange rate has depreciated by about 95 percent since the beginning of December 2023; the gap to the parallel market rate remains wide (above 30 percent); and ZWL inflation is still very high. This instability weighs on sentiment, while exchange rate restrictions (prescribing retailers to use the official ZWL exchange rate with up to a 10 percent margin—inflating US dollar prices) continue to be a burden on the formal sector. They promote informality, which erodes the tax base and undermines longer-term growth prospects. Risks remain skewed to the downside, and the outlook will crucially depend on progress toward macroeconomic stabilization and transformational structural reforms.

“The authorities have requested a new Staff Monitored Program (SMP) to support their stabilization efforts and reengagement with the international community through building a track record of sound economic policies. The mission was a step in the preparations for an SMP and initiated Article IV consultations. Discussions covered policies to restore macroeconomic stability and improve growth prospects, focusing on addressing the sources of fiscal pressures including quasi-fiscal operations (QFOs) of the Reserve Bank of Zimbabwe (RBZ); liberalizing the foreign exchange market and establishing an effective framework for exchange rate and monetary policies; and progressing on reforms to improve economic governance and reduce corruption vulnerabilities.

“The mission welcomes the authorities’ strong resolve to address the sources of fiscal pressures. The transfer of RBZ’s external liabilities related to the QFOs to the Treasury—which include long-term loans, short-term liabilities, and the “blocked funds”—represents an important step in this regard. However, the larger-than-anticipated costs of servicing these obligations will open a financing gap in the 2024 budget. Discussions focused on identifying options to close this gap in a way that avoids inflationary financing, and the mission encourages the authorities to develop and implement a comprehensive plan to this end. This should be accompanied by ensuring that the appropriate legal framework is in place to complete the transfer. Restoring macroeconomic stability will also require addressing other sources of fiscal pressures, including those emanating from other non-core (not related to the goal of price and financial stability) operations of the RBZ and from SOEs.

“The mission encourages the authorities to accelerate the FX market reform by promoting a more transparent and market-driven price discovery in the official exchange rate and by removing existing exchange restrictions and distortions. In particular, the restriction on the 10 percent allowable trading margin for pricing domestic transactions should be eliminated. The FX market reform should be accompanied by establishing an effective framework for exchange rate and monetary policies. Establishing such a framework requires careful preparations, including, among other steps, comprehensively addressing underlying sources of fiscal pressures. The RBZ Act should be amended, including to narrow its legal mandate to core functions.

“Structural reforms aimed at improving the business climate, strengthening economic governance and reducing corruption 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). In this context, the mission encourages the authorities to ensure that the corporate governance arrangement, transparency and financial reporting, and accountability oversight of the recently established Mutapa fund are in line with international standards and good practices.

“Sustainable development will also require the resolution of the debt overhang. International reengagement remains critical for debt resolution and access to financial support. In this context, the authorities’ reengagement efforts, through the Structured Dialogue Platform, are key for attaining debt sustainability and gaining access to concessional external financing.

“The IMF maintains an active engagement with Zimbabwe and continues to provide policy advice and extensive technical assistance in the areas of revenue mobilization, expenditure control, financial supervision, debt management, economic governance and anti-corruption, and macroeconomic statistics. However, the IMF is currently precluded from providing financial support to Zimbabwe due to its unsustainable debt situation—based on the IMF’s Debt Sustainability Analysis (DSA)—and official external arrears. An IMF 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.

“The IMF staff held meetings with Minister of Finance and Economic Development Hon. Professor Mthuli Ncube, the Deputy Minister of Finance and Economic Development Hon. David Mnangagwa, the Reserve Bank of Zimbabwe Governor Dr. John Mangudya, other senior government and RBZ officials, the private sector, civil society organizations, and Zimbabwe’s development partners.

“The IMF staff wishes to thank the Zimbabwean authorities and other stakeholders for the constructive discussions and support during the 2024 Article IV consultation mission.”