The International Monetary Fund (IMF) says Zimbabwe’s economy is showing signs of recovery following last year’s slowdown but warns that fiscal pressures, rising domestic arrears and weak confidence in the local currency could derail progress unless decisive reforms are implemented.
In its 2025 Article IV Consultation Report released in Washington last week, the IMF commended authorities for tightening monetary policy and halting central bank quasi-fiscal operations which helped reduce inflation and stabilise the Zimbabwe Gold (ZiG) currency.
Economic growth is forecast to rebound to 6 percent in 2025 driven by improved agricultural output, record-high gold prices and strong remittance inflows.
However, the Fund cautioned that significant downside risks persist with limited foreign reserves, unsustainable debt and a widening fiscal gap threatening medium-term stability.
The IMF estimates that Zimbabwe accumulated nearly US$600 million in domestic arrears last year while access to external financing remains severely constrained.
“Persistent fiscal financing gaps are inconsistent with achieving durable macroeconomic stability,” the report said, urging government to cut spending, rationalise tax incentives and strengthen public financial management systems to prevent further arrears.
The IMF also called for reforms to enhance transparency and oversight of the Mutapa Investment Fund which assumed several state-owned assets in recent years warning that weak governance could expose the public purse to additional fiscal risks.
On monetary policy, the IMF noted that the ZiG had stabilised since late 2024 following tighter liquidity controls by the Reserve Bank of Zimbabwe (RBZ) but urged authorities to shift toward a more transparent, market-based exchange rate system and clarify the roadmap for the planned transition to a mono-currency regime by 2030.
While the IMF acknowledged the government’s ongoing re-engagement efforts with international creditors, it stressed that restoring debt sustainability would require a credible reform track record supported by fiscal discipline and governance improvements.
Zimbabwe’s public debt is estimated at US$23.3 billion, or nearly 73 percent of GDP with arrears to international creditors exceeding US$7 billion.
The Fund’s assessment concluded that the current period of relative stability offers a window of opportunity for the government to implement long-awaited reforms that could cement economic recovery and restore investor confidence.
“Without strong policy action, the economy remains vulnerable, and recent progress could be easily reversed,” the IMF warned.
