IMF: Zimbabwe economy will grow 6% in 2021, but more reforms needed

Retail demand under pressure (pic: Jekesai Njikizana/AFP)

The International Monetary Fund (IMF) says Zimbabwe’s economy will grow by 6% this year on higher farm output and a recovery in energy, manufacturing and construction. 

The IMF’s latest forecast, released on Wednesday, is an upgrade on its earlier 2021 projection of 3.1%. But its expectations remain lower than government’s more ambitious 7.4%. The World Bank last week said it sees economic recovery of 3.9% this year. 

The IMF previously estimated that Zimbabwe’s economy had shrunk by 8% last year. Now it says the economy contracted by 4%. 

“However, an economic recovery is underway in 2021, with real GDP expected to grow by about 6%, reflecting a bumper agricultural output, increased energy production, and the resumption of greater manufacturing and construction activities,” the IMF said in a statement that followed a virtual staff visit to Zimbabwe from June 1-15. 

But the IMF said growth would depend on COVID19 and government’s own policies. 

“Uncertainty remains high, however, and the outlook will depend on the pandemic’s evolution, the pace of vaccination and implementation of sustainable policies,” the Fund said. 

The IMF had both praise and warnings for Zimbabwean authorities. 

“The IMF mission notes the authorities’ efforts to stabilise the local currency and lower inflation. In this regard, contained budget deficits and reserve money growth, as well as the introduction of a foreign exchange auction system, are policy measures in the right direction,” said the IMF. 

But, the Fund said, more extensive reforms are needed. 

“In line with the last Article IV consultation, the mission highlighted that structural reforms aimed at improving the business climate and reducing governance vulnerabilities are essential for ensuring sustained and inclusive growth.”

The IMF again said while Zimbabwe has cleared its arrears with the Fund, there will be no fresh credit until it clears its debts with other major lenders. 

Said the IMF: “A Fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and obtaining financing assurances from official creditors; 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.”

During the virtual visit, the IMF delegation met Finance Minister Mthuli Ncube, Reserve Bank of Zimbabwe Governor John Mangudya, private companies and donor agencies.