THE International Monetary Fund (IMF) has warned that COVID-19 will adversely impact on Zimbabwe’s struggling economy, adding that there is need for government to craft good policies to address the country’s macro-economic stability and social needs.
BY VENERANDA LANGA
In a statement released on Friday, IMF executives said with another poor harvest in 2020, Zimbabwe’s projected economic growth would likely drop to 0%.
The World Food Programme last week also classified Zimbabwe as one the countries that will likely come out of the COVID-19 pandemic worse off.
IMF said the near zero economic growth rate follows a sharp contraction in 2019, with food shortages continuing, adding that with no progress on clearing long-standing external arrears, the authorities in Harare faced a difficult balance of pursuing tight monetary measures to reduce inflationary pressures.
“While highly uncertain at this stage, it is clear that COVID-19 will adversely impact the economic outlook for Zimbabwe and require additional health-related spending and international support,” the IMF statement read.
“COVID-19 will make it even harder to balance the policies needed to restore macro-economic stability with those to address urgent social needs. Zimbabwe is experiencing an economic and humanitarian crisis”.
The IMF said Zimbabwe’s economy contracted sharply in 2019, amplified by climate shocks, including Cyclone Idai, which destroyed infrastructure in three provinces and drought that crippled agriculture and electricity generation.
“The newly-introduced Zimdollar has lost most of its value; inflation is very high; and international reserves are very low. The climate shocks have magnified the social impacts of the fiscal retrenchment, leaving more than half of the population food insecure.
With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing.”
But they said the notable reforms supported by the Staff-Monitored Programme from the IMF include a significant fiscal consolidation which has helped reduce the monetary financing of the deficit, the introduction of the new domestic currency in February 2019, the creation of the interbank foreign exchange market, and the restructuring of the Command Agriculture financing model to a public-private partnership with commercial banks.
The IMF executive directors raised concern over delays in re-engagement with the international community, as well as government’s failures to define modalities and financing to clear arrears to the World Bank and other multilateral institutions and to undertake reforms that would facilitate clearance of arrears with bilateral creditors.
“This continues to constrain Zimbabwe’s access to external official support,” the IMF said.
The Bretton Woods institute also called on the Zimbabwean government to address governance and corruption challenges, entrenched in vested interests, and said that the rule of law must be enforced to improve the business climate and support private sector-led inclusive growth.
The IMF said the Staff-Monitored Programme was off-track and urged continued engagement between the fund and the authorities, including through technical assistance, policy advice and other innovative ways to help immediately stabilise the economy and address the humanitarian crisis.