Zimbabwe growth to weaken further in 2015 – IMF

The International Monetary Fund (IMF) says Zimbabwe’s economic prospects remain bleak with its external position still precarious due to debt distress.

The IMF last month revised downwards Zimbabwe’s economic growth for 2015 to 2.8 percent from the initial 3.2 percent. The downward revision was largely due to the poor agricultural season and depressed international commodity prices.

In a statement released on Tuesday, IMF said Zimbabwe’s growth had slowed down and was expected to weaken further this year.

“Despite the favorable impact of lower oil prices, the external position remains precarious and the country is in debt distress. Key risks to the outlook stem largely from a further decline in global commodity prices, fiscal challenges and possible difficulties in policy implementation,” said the IMF.

Zimbabwe has an external debt of at least 10 billion U.S. dollars.

According to the Global Economic Prospects for 2015, the World Bank classifies Zimbabwe as a fragile country and is listed in the same bracket as Chad, Eritrea, Myanmar and Somalia.

Last month, the IMF completed its first review of the successor Staff-Monitored Program (SMP) with Zimbabwe.

Under the 15-month successor SMP, approved in October 2014 and running until December 2015, Zimbabwe has committed itself to undertaking fiscal policy reforms by eliminating primary fiscal deficits, reducing government’s wage bill currently gobbling 80 percent of state revenue and restoring confidence in the financial sector by clearing non performing loans.

Other targets include improving the investment climate by further clarifying the indigenization law which requires foreign investors to sell majority shareholding to locals and development of a strategy to clear the country’s external debt with multilateral creditors.

The IMF said the main objective of the SMP is to strengthen Zimbabwe’s external position as a prerequisite towards arrears clearance, normalization of debt servicing and restoring access to external financing.

It, however noted that this will require further fiscal consolidation to rebuild the country’s capacity to repay, restoring financial stability and mobilizing international support for resolving the country’s external debt situation.

Finance Minister Patrick Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya were in Washington DC last week attending the IMF’s 2015 spring meetings and hoping to use the forum to engage multilateral lending institutions.

While Zimbabwe implements the SMP, the IMF has ruled out financial assistance until Zimbabwe settles its more than 1 billion debt to the IMF, World Bank and the African Development Bank.

The country owes the WB 1 billion dollars, IMF 142 million dollars and the AfDB 566 million dollars.

The IMF said despite economic and financial difficulties, Zimbabwean authorities had made progress in implementing their macroeconomic and structural reform programs, particularly regarding clarifying the indigenization policy, restoring confidence and improving financial sector soundness and strengthening public financial management.

“IMF staff will continue to support Zimbabwe’s economic reforms and their pursuit towards a debt relief strategy,” the IMF said. Source: Xinhua