Zimbabwe’s struggling economy is far from emerging from its deep abyss despite efforts by the government to rebalance policies to stabilise macroeconomic environment to facilitate a private sector-led growth.
An International Monetary Fund (IMF) mission led by Domenico Fanizza has concluded that despite the efforts, economic conditions in Zimbabwe will remain difficult in the foreseeable future.
“The Zimbabwe government has redoubled its efforts to rebalance policies toward a stable macroeconomic environment conducive to private sector-led growth. Nonetheless, economic conditions remain difficult,” said Fanizza.
He noted that growth has slowed down because of inadequate financial flows despite a very favourable agricultural season.
This, coupled by the appreciation of the South African Rand, the major currency of Zimbabwe’s trading partner, has caused a liquidity crunch that has weakened economic activity.
The external position remains precarious with low levels of international reserves, a large current account deficit, and external arrears.
The mission welcomed Zimbabwe’s decision to start working with the international financial institutions to prepare a plan for clearing the outstanding arrears as a step toward resolving the country’s debt challenge.
“It is encouraging that the authorities have come to the conclusion that Zimbabwe cannot address these challenges without the support of the international financial community,” noted Fanizza.
Some of the areas that Zimbabwe need to partner with the international community is in balancing the primary fiscal budget, something that will send a strong signal that Zimbabwe’s government intends to live within its means.
Moreover, fiscal policy will focus on raising the efficiency and quality of public spending and rebalancing the expenditure mix toward infrastructure and social outlays.
Other areas are in restoring confidence and stability in Zimbabwe’s financial sector, addressing the country’s debt challenge by stepping up re-engagement with all creditors with the objective to normalize relations and clarifying the Indigenisation and Economic Empowerment Laws.
International Monetary Fund (IMF)