IMF commends Zim progress
The International Monetary Fund (IMF) staff team has commended Government’s policy interventions meant to tame inflation and exchange rate volatility, saying they are steps in the right direction.
The IMF staff team led by Dhaneshwar Ghura, conducted a staff visit in Harare from 12 to 19 September 2022 to discuss recent economic developments and the economic outlook.
Ghura said the efforts were commendable adding the economy had been resilient at a time the country was battling a myriad of challenges such as the adverse impacts of the Covid 19 and the war in Ukraine.
The second quarter of 2022 saw renewed price and exchange rate depreciation pressures emerged, with inflation in August reaching 285 percent over a year earlier. After rising to about 7 percent in 2021, real GDP growth is now expected to decline to about 3,5 percent in 2022 reflecting a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability, amidst a recovery in mining and tourism.
But the IMF team notes the economic outlook depends on among others, the evolution of the external shocks and implementation of inclusive growth friendly policies. So far the country is moving in the right direction.
“The IMF mission notes the authorities’ efforts to stabilise the local foreign exchange market and lower inflation,” he said in a statement.
“In this regard, the recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap.
“Further efforts are needed to durably anchor macroeconomic stability and accelerate structural reforms. In line with recommendations from the 2022 Article IV consultation, the near-term macroeconomic imperative is to curb inflationary pressures by further tightening monetary policy, as needed and allowing greater exchange rate flexibility through a more transparent and market-driven price discovery process, tackling FX market distortions and eliminating exchange restrictions,” said Ghura.
The IMF team also recommended the Reserve Bank of Zimbabwe (RBZ) quasi-fiscal operations should be transferred to the budget to enhance transparency, improve the conduct of monetary and exchange rate policy, and enhance central bank independence.
“Structural reforms aimed at improving the business climate and reducing governance vulnerabilities are key for promoting sustained and inclusive growth.
“Durable macroeconomic stability and structural reforms would bode well for supporting Zimbabwe’s development objectives as embodied in the country’s National Development Strategy 1 (2021-2025)” said Ghura.
The IMF staff held meetings with Minister of Finance and Economic Development Professor Mthuli Ncube, his Permanent Secretary George Guvamatanga, the RBZ Governor Dr John Mangudya, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.-ebusinessweekly
