HARARE: The International Monetary Fund (IMF) sees Zimbabwe’s economy registering a modest growth of 2,7% from a forecast of 1,5% this year, discounting fears of a recession triggered by weakening commodities prices and poor rainfall pattern.
In its review of a Staff Monitored Programme on Zimbabwe, the multilateral institution said while the country’s downside risks to the outlook stem mainly from fiscal challenges, weak global commodity prices, adverse weather conditions, and difficulties in policy implementation, ongoing reforms could stimulate growth in the medium to long term.
The IMF in its review of the SMP, however, said Zimbabwe’s gross domestic product would improve. The SMP — an informal agreement between a government and IMF staff to monitor implementation of its economic reforms — gave the government a thumbs-up on its targets set under the programme. Early this year experts projected that the economy would next year register negative growth before sliding to recession. They projected that the economy would grow by 0,9% this year.
The IMF, which at the start of the year projected that Zimbabwe’s economy would register a 3,2% growth this year, later revised the forecast to 1,5% on weakening commodity prices. Lack of long term capital to retool, weakening aggregate demand and deflation has seen most companies struggling to remain afloat.
“On the upside, strong implementation and deepening of economic reforms, and progress in re-engaging with creditors could re-open access to financial support that could reverse the adverse economic trend and improve the economic outlook,” the IMF said in a report.
The Bretton Woods institution said Zimbabwe had met four of the five quantitative targets under the SMP, despite the economic and financial difficulties, demonstrating the authorities’ strong commitment to the programme.
“On the quantitative targets, the adjusted floor on the primary budget balance of the central government was met by a small margin, and expenditure on priority social spending was on target. The authorities exceeded the target for the floor on the stock of international reserves,” the IMF said in a report released on Friday.
“However, the authorities contracted a US$200 million non-concessional loan and used it mainly to restructure existing obligations —including for key economic sectors. While this loan helped avoid the accumulation of additional external arrears, it resulted in a breach of the quantitative target for new non-concessional debt.”
Zimbabwe’s public and publicly-guaranteed debt which stood at US$8,4 billion as at end of June 2015 remains an albatross on government. The country last week undertook to pay its arrears to the three international financial institutions—IMF, World Bank and African Development Bank US$1,8 billion by April 2016, paving way for long term capital. IMF is owed US$110 million, the World Bank (US$1,15 billion) and AfDB (US$601 million).
