IMF revises Zim growth estimate
THE International Monetary Fund (IMF) has upgraded its estimate for economic growth in Zimbabwe this year from 5,1 percent to 6 percent, very close to the Government estimate of 7,8 percent, based on increased productive investment, and has given a thumbs up to the continued programme of almost eliminating budget deficits and controlling money supply to curb inflation.
The differences between IMF and Government estimates are now a matter of degree, and the gap is small, rather than on any matter of substance or policy.
The estimate came in preliminary findings by an IMF staff team led by Mr Dhaneshwar Ghura, Mission Chief for Zimbabwe, after concluding Article IV Mission to Zimbabwe through virtual meetings from October 25 to November 16.
Mr Ghura held discussions with Finance and Economic Development Minister Professor Mthuli Ncube, Secretary for Finance George Guvamatanga, 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 development.
The IMF in June this year had said Zimbabwe is on a path to economic recovery with a growth forecast of 6 percent expected this year largely due to a bumper harvest of maize.
In his 2021 mid-term budget, Professor Ncube, revised upwards the Government’s own economic growth projections to at least 7,8 percent this year, compared to the previously projected 7,4 percent on the back of a stellar 2020/21 agricultural season, higher international commodity prices, stable macroeconomic environment, and a wellmanaged Covid-19 control programme.
According to figures from the Grain Marketing Board, Zimbabwe this year achieved record maize deliveries of 1 092 265 tonnes of maize, representing a 535 percent increase compared to last year. Added to this will be close on 1 million tonnes retained by farmers for family and farm consumption.
The Government is also set to surpass its initial target of achieving a US$48,2 billion agriculture economy by 2025 as the sector has already grown to US$7,8 billion in the last 12 months buoyed by a successful 2020/21 agricultural season.
The agriculture sector is projected to grow by 34 percent, three times better than the initial projection of 11 percent. The World Bank has also maintained a positive economic growth outlook of 3,9 percent this year, a significant improvement after two straight years of recession.
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 as rains normalise, businesses adjust to limitations caused by the Covid-19 pandemic, and inflation slows.
Mr Ghura noted that Zimbabwe’s swift response to Covid-19, 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.
“Zimbabwe’s economy contracted cumulatively by about 11 percent during 2019-20 owing to the combined effects of the pandemic, Cyclone Idai, a protracted drought, and weakened policy buffers,” said IMF.
Mr Ghura said decisive actions are needed to lock in economic stabilisation gains and accelerate reforms.
The near-term macroeconomic imperative is to continue with the close coordination among fiscal, exchange rate and monetary policies.
“In this context, key priorities relate to: allowing greater official exchange rate flexibility and tackling foreign currency market distortions, accompanied by an appropriate monetary stance; creating fiscal space for critical spending while containing fiscal deficits; implementing growth-enhancing structural and governance reforms; and continuing to enhance data transparency,” Mr Ghura said.
Reforms were critical in improving the business climate and reduce governance vulnerabilities, and thus foster higher sustained and inclusive growth.
“To this end, the authorities’ strategy and policies as embodied in their 2021-25 National Development Strategy 1 are appropriate and need to be fully operationalised and implemented. Durable macroeconomic stability and structural reforms would support the recovery and Zimbabwe’s development objectives,” the IMF official said.
The mission noted the authorities’ plans to use the recent allocation of special drawing rights to support spending in social, productive, and infrastructure sectors, as well as building reserve buffers.
Mr Ghura said in this context, the use of the SDR allocation should not substitute for critical reforms, should be spent on priority areas within a medium-term plan, and follow good governance and transparency practices.
The IMF mission noted that “Zimbabwe has been a fund member in good standing since it cleared its outstanding arrears in late 2016”.
“The fund engages the authorities in close policy dialogue and provides extensive technical assistance in the areas of economic governance, fiscal policy and revenue administration, financial sector reforms, as well as macroeconomic statistics,” Mr Ghura said.-The Herald
