IMF insists cannot give Mnangagwa’s govt money without reforms

The International Monetary Fund (IMF) has insisted that it will not allocate money to Zimbabwe without a clear path to comprehensive restructuring of external debt, “including the clearance of arrears; a reform plan that is consistent with macroeconomic stability, growth and poverty reduction; a reinforcement of the social safety net; and governance and transparency reforms.”

IMF staff team led by Dhaneshwar Ghura conducted a staff visit in Harare during September 12–19, 2022 to discuss recent economic developments and the economic outlook.

They met with Finance and Economic Development Mthuli Ncube, his Permanent Secretary George Guvamatanga, the Reserve Bank of Zimbabwe Governor John Mangudya, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.

After the mission, Ghura issued the following statement stating clearly that the IMF was still prohibited from providing financial support to Zimbabwe due to unsustainable debt, official external arrears and the absence of a reform plan that is consistent with macroeconomic stability among other factors.

“As stated in the 2022 Article IV consultation, Zimbabwe has been a Fund member in good standing since it cleared its outstanding arrears to the IMF in late 2016,” he said.

“The Fund provides extensive technical assistance in the areas of economic governance and financial sector reforms, as well as macroeconomic statistics. The IMF is, however, precluded from providing financial support to Zimbabwe due to unsustainable debt and official external arrears.

“A Fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears; a reform plan that is consistent with macroeconomic stability, growth and poverty reduction; a reinforcement of the social safety net; and governance and transparency reforms. International reengagement remains critical for debt resolution and access to financial support.

Ghura acknowledged various economic developments that the government has managed to institute despite the Covid-19 pandemic which ravaged the global economy.

The mission also found that after rising to about 7 percent in 2021, real GDP growth was expected to decline to about 3½ percent in 2022 “reflecting a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability, amidst a recovery in mining and tourism.

“The IMF mission notes the authorities’ efforts to stabilize the local foreign exchange market and lower inflation. In this regard, the recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap.

“Further efforts are needed to durably anchor macroeconomic stability and accelerate structural reforms. In line with recommendations from the 2022 Article IV consultation, the near-term macroeconomic imperative is to curb inflationary pressures by further tightening monetary policy, as needed, and allowing greater exchange rate flexibility through a more transparent and market-driven price discovery process, tackling FX market distortions, and eliminating exchange restrictions.”

Ghura added that the outcome of the IMF staff visit would serve as a key input in the preparations for the next Article IV consultation mission.