IMF issues strong rebuke of Mnangagwa’s regime, emphasises reforms

The International Monetary Fund (IMF) has issued a strong rebuke of President Emmerson Mnangagwa’s regime especially on how it is managing the economy and emphasised the need for uncompromising reforms in order to curb the skyrocketing inflation.

An International Monetary Fund (IMF) staff team led by Dhaneshwar Ghura conducted a mission to Harare during December 1-15, 2022, in the context of the 2023 Article IV Consultation.

The Fund, at the conclusion, did not witness the negative only, it acknowledged that the government had instituted better policies in a swift response to the Covid-19 pandemic.

In a statement issued on Thursday morning, on behalf of the mission, Mr. Ghura said the IMF was advising the Zanu-PF led government to stop quasi fiscal activities, liberalize the exchange rate, end loose monetary policy, wind down gold coins and restore macroeconomic stability.

“The IMF mission notes the authorities’ efforts to stabilize the local foreign exchange market and lower inflation. In this regard, the tightening of monetary policy along with a prudent fiscal stance are policies in the right direction and have contributed to a narrowing of the premia in the parallel foreign exchange market.

“In addition, the authorities have identified large payments to suppliers, the result of over-invoicing, as a source of pressures on the parallel market and in response have launched value-for-money audits and introduced measures to strengthen procurement regulations.

“Uncertainty remains high, however, and the economic outlook will depend on the implementation of key policies and the evolution of external shocks,” Mr. Ghura said.

“A near-term policy imperative is to sustainably anchor macroeconomic stability. In this context, Fund staff recommend accelerating the liberalization of the FX market, including through the removal of restrictions on the exchange rate at which banks, authorized dealers. and businesses transact; addressing the Reserve Bank of Zimbabwe’s quasi-fiscal operations to mitigate liquidity pressures; maintaining an appropriately tight monetary policy stance to durably restore macroeconomic stability and ensure social stability; restoring the nominal anchor for monetary policy, including through the use of appropriate interest-bearing instruments to mop up liquidity and winding down the use of gold-coins; and maintaining a prudent fiscal stance.”

The Fund said fiscal policy should aim at containing the deficit in line with available non-inflationary financing and creating fiscal space for critical spending.

“This can be achieved by mobilizing additional revenues, based on tax policy reforms, and by scaling back non-priority outlays, while strengthening public finance management. The financial oversight of the SOES by the Treasury should be further strengthened in order to minimize fiscal risks.

“In the context of a tight monetary policy, enhanced regulatory oversight is required to ensure financial sector resilience,” read the statement.

The mission added that addressing the remaining AML/CFT weaknesses would strengthen banks’ resilience and effectiveness.

“Reforms to economic institutions and the governance and anti- corruption frameworks are critical for strengthening the foundations for private sector development and inclusive growth.

“Ensuring durable macroeconomic stability and revitalizing structural reforms would support Zimbabwe’s development objectives as embodied in the country’s National Development Strategy 1 (2021-2025).

“International reengagement remains critical for debt resolution and access to external financial support. In a bid to advance the reengagement process, the authorities have adopted an Arrears Clearance, Debt Relief and Restructuring strategy; continued token payments to external creditors; and launched a Dialogue Platform to foster discussions among the various stakeholders.

Meanwhile, IMF staff held meetings with Minister of Finance and Economic Development Professor Mthuli Ncube, his Permanent Secretary George Guvamatanga, Reserve Bank of Zimbabwe Governor Dr. John Mangudya, Deputy Chief Secretary to the President and Cabinet Willard Manungo, other senior government and RBZ officials, representatives of the private sector, civil society, and Zimbabwe’s development partners.