Zim edges closer to key IMF agreement

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube has told key leaders from the continent and beyond that the Treasury expects to reach a Staff Level Agreement (SLA) with the International Monetary Fund (IMF) on a Staff Monitored Programme (SMP) by June this year, a significant milestone anticipated to boost investor sentiment and the country’s economic reform programme.

A staff-level agreement is a significant precursor to a formal financial support programme as it reflects consensus between the IMF technical staff and Government authorities on a broad set of reforms required to address prevailing economic imbalances.

The agreement paves the way for further high-level negotiations that could lead to financial assistance under an IMF-supported programme.

Under the proposed framework, Zimbabwe is expected to implement key policy measures, including fiscal consolidation, tighter monetary policy and deep-rooted structural economic reforms.

These measures are designed to rein in inflation, stabilise public finances and rebuild investor confidence.

Crucially, the agreement also emphasises the protection of vulnerable communities through enhanced social safety nets to cushion the population during the reform period.

The successful implementation of the agreed policies is a prerequisite for IMF Executive Board approvals and the subsequent disbursement of funds.

Authorities have expressed commitment to the reform path, viewing it as essential to unlocking international support and rebuilding a resilient, inclusive economy.

On the other hand, an SMP is an informal arrangement with the IMF where its staff monitor the implementation of a country’s economic programme.

While it does not involve financial assistance, successful completion allows a country to build a credible track record of sound economic policies, which may unlock access to concessional financing and international capital markets.

Securing an SMP is a central plank of Zimbabwe’s Arrears Clearance and Debt Resolution Strategy, which seeks to normalise relations with creditors and restore macroeconomic stability.

By clearing arrears to all creditors and restructuring of external debt to achieve a sustainable debt profile, the country will pave the way for sustained inclusive economic growth, one that fosters inclusive growth, attracts investment and creates meaningful job opportunities for all Zimbabweans.

Speaking at the African Development Bank (AfDB) Annual Meetings in Ivory Coast on Monday, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube said discussions with the IMF were at an advanced stage.

AfDB’s annual meetings, the institution’s most important event, are attended by a diverse range of participants, including African Heads of State and government, finance ministers, central bank governors, development partners, private sector representatives, civil society leaders, academics and other stakeholders.

The meetings provide a unique forum for exchanging views on key issues concerning Africa’s development

“Strong progress [has been] made towards reaching Staff Level Agreement (SLA) on a Staff Monitored Programme (SMP) with the IMF, including further alignment on fiscal and foreign exchange market reforms during the IMF’s Mission to Zimbabwe in January–February 2025, to be finalised by end of June, 2025,” revealed Prof Ncube.

He indicated that throughout 2024, the country engaged in extensive technical-level discussions with IMF staff, which are continuing, especially around key prior actions. These include exchange rate reforms, fiscal consolidation to prevent reliance on monetary financing and avoidance of new arrears.

At a recent round-table on the sidelines of the IMF and World Bank Group Spring Meetings, international organisations, creditors and stakeholders unanimously acknowledged the significant progress achieved through two years of structured dialogue.

Despite economic pressures, the Zimbabwean Government managed to limit the 2024 budget deficit to one percent of GDP, amid strong revenue collections.

However, the transfer of the Reserve Bank of Zimbabwe’s (RBZ) quasi-fiscal operations to the Treasury led to increased fiscal strain. This resulted in the accumulation of domestic expenditure arrears, prompting the Government to implement emergency spending cuts.

The IMF projects the country’s economy to grow by six percent this year, with improved agricultural output expected due to better weather conditions and a projected increase in global trade activity.

In response to these challenges and opportunities, the Zimbabwean Government has requested an SMP to support economic stabilisation and re-engagement with international creditors.

Development economist Ms Alice Chikonzi said securing a Staff Level Agreement with the IMF by June would be a critical milestone in Zimbabwe’s economic reform agenda.

“An SLA signals to international markets and creditors that Zimbabwe is committed to fiscal discipline, transparency and structural reforms. This would not only enhance investor confidence but also open pathways for debt restructuring and access to concessional financing.

“At a time when the country needs to stabilise its currency, control inflation and rebuild key infrastructure, an SLA could serve as a foundational step toward broader economic recovery and international re-engagement,” she asserted.

Prof Ncube noted that among key achievements is the transfer of legacy debt obligations from the Reserve Bank of Zimbabwe’s quasi-fiscal operations (QFOs) to the Treasury. No new QFOs have been undertaken since, underscoring the commitment to macroeconomic discipline.

Another major milestone is the launch of the Zimbabwe Gold (ZWG) currency in April 2024, with the exchange rate now determined through a Willing Buyer, Willing Seller (WBWS) system on the interbank market, in line with market-based reforms.

In terms of external obligations, the Government has resumed token payments to international creditors, beginning with the March quarterly payments to the 16 Paris Club members and the three International Financial Institutions (IFIs), namely the World Bank, the African Development Bank and the European Investment Bank.

On the fiscal front, Prof Ncube said prudent budget management continued, with expenditure aligned to available revenue.

The 2025 National Budget maintains a fiscal deficit below 2 percent of GDP, having stood at 0,1 percent in 2022, 6,4 percent in 2023, and projected at 0,4 percent in both 2024 and 2025.

He added that new revenue measures have been introduced to widen the tax base, including a 10 percent withholding tax on gross winnings from sports betting, a fast-food levy, taxation of the informal sector and a 0,5 percent royalty on quarry stone sales.

The broader arrears clearance and debt resolution process is underpinned by a long-term reform agenda implemented through the Structured Dialogue Platform (SDP), which was launched in December 2022.

The SDP aims to institutionalise engagement with creditors, development partners and stakeholders. It aligns with the Government’s Vision 2030 and the National Development Strategy 1 (NDS1).

It is structured around three strategic pillars supported by Sector Working Groups (SWGs).

The Structured Dialogue Platform process is being supported by the African Development Bank through the UA3 million (US$4 million) Support for Arrears Clearance and Governance Enhancement (SACAGE) Project Grant.

Official statistics indicate that as of December 2024, the country’s total Public and Publicly Guaranteed (PPG) debt stock stood at US$21 billion, comprising external debt of US$12,2 billion and domestic debt of US$8,8 billion.

Out of this multilateral debt, US$676 million is owed to the African Development Bank, US$1,6 billion to the World Bank and US$425 million to the European Investment Bank.

The accumulation of public debt arrears has limited Zimbabwe’s access to external financing needed to achieve the National Development Strategy 1 (NDS1) development objectives and the Vision 2030 Sustainable Development Goal

Prof Ncube said significant progress has been made across all three pillars over the past year.

The Government now plans to introduce a fourth pillar focusing exclusively on debt resolution, to facilitate a transparent and inclusive approach to resolving long-standing debt issues.

“The Debt Resolution Sector Working Group aims to bring Zimbabwe’s creditors together throughout the implementation of the Government’s Roadmap towards Arrears Clearance and Debt Resolution, by signalling Zimbabwe’s commitment to information sharing, transparency and an institutionalised approach to debt resolution,” said Prof Ncube.

Priority actions for the next 12 months include engaging bilateral champions, finalising a credible strategy to close the fiscal financing gap, agreeing with the IMF and securing and signing off the SMP with the IMF.

In the fourth quarter of 2025 and into the first quarter of 2026, the Government anticipates securing bridging finance and commencing the clearance of arrears with IFIs. Key steps for 2026 include the establishment of an Official Creditor Committee (OCC), SLA on an IMF Upper Credit Tranche (UCT)-quality programme, securing financing assurances from official bilateral and commercial creditors and IMF Board approval of the UCT programme

The reform programme signals Zimbabwe’s strong commitment to sustainable economic recovery, fiscal discipline and re-engagement with the global financial community.-herald