The International Monetary Fund (IMF) has expressed concerns over Zimbabwe’s failure to tame inflation to single-digit figure levels to sustain gains achieved in the last two years and a lack of political and economic reforms which are essential to the country’s international reengagement efforts.
The Executive Board of the IMF concluded the Article IV Consultation with Zimbabwe this week.
The Bretton Woods institution said Zimbabwe experienced severe exogenous shocks (cyclone Idai, protracted drought, and the COVID-19 pandemic) during 2019-20, which along with policy missteps in 2019, led to a deep recession and high inflation but owing to authorities’ swift response to the pandemic a 1.6 percent growth in GDP was achieved in 2021.
“However, high double-digit inflation and wide parallel foreign exchange market premiums have persisted,” the IMF warned.
The Zimbabwe dollar is currently valued at ZWL$ 138 against the American dollar (USD) on the auction system which is the official index, while on the parallel market it trades between ZWL$ 220-240 against the USD, reflection a variance of almost 100 percent.
This has created inflationary pressures in the economy. In February this year, month-on-month inflation reached 7 percent, the highest movement in 18 months.
The IMF also noted that international reengagement had lagged as stakeholders continue to insist on political and economic reforms.
“Noting that substantial challenges remain, including extreme poverty and longstanding structural constraints, they urged the authorities to implement the necessary reforms that would foster higher, more inclusive growth and pave the way for reengagement with the international community,” said the IMF.
Zimbabwe has developed a debt resolution strategy and started token payments to creditors in a bid to make progress on reengagement.
The country’s external debt of is hovering around US$10 billion, mainly in arrears.
The 2019 Staff-Monitored Program experienced significant policy slippages and elapsed without a review. Since then, the IMF says, Zimbabwe has made significant progress towards restoring macroeconomic stability, though the implementation of past IMF policy advice has been mixed.