Zim economy faces collapse: IMF

HARARE - The International Monetary Fund (IMF) has warned of a challenging economic environment ahead and urged government to pursue strong macroeconomic policies.

An IMF staff mission, led by Alfredo Cuevas, which was in the country to hold discussions on the 2014 Article IV Consultation and the combined first and second reviews under the Staff-Monitored Programme (SMP), yesterday warned Zimbabweans to brace for tough times ahead.

“The macroeconomic environment is expected to remain challenging in 2014, and the outlook is for continued moderate growth,” said the team in a statement at the conclusion of their one-week visit.

“Achieving Zimbabwe’s fuller growth potential over the medium term depends on pursuing strong macroeconomic policies, including building up fiscal and external buffers and increasing budgetary resources going to non-personnel related spending, and implementing structural reforms to foster investment, improve the business climate, and strengthen governance and institutions, including by increasing the transparency of the minerals regime.”

The IMF team noted that it would also be necessary for the southern African country to engage with its creditors to work towards a solution to the long-standing debt arrears problem.

“Downside risks to the outlook include the possibility of further weakening of export prices, a tightening of external financing conditions, as well as risks related to policy implementation delays.

“Should these risks materialise, they would adversely impact output growth and fiscal revenue.

“To mitigate these risks, it is important to strengthen fiscal policy, identify potential sources of domestic and foreign financing, and address financial sector vulnerabilities,” warned the IMF.

The warning by the Bretton-Woods institution comes at a time the Zanu PF-led government is failing to turn around the fortunes of the economy.

Zimbabwe’s economy, which showed signs of revival during the inclusive government era, has been sliding into deflation following the July 31 election that Zanu PF won under controversial circumstances.

Growth decelerated in 2013, reflecting the impact of adverse weather conditions, weak prices for key exports, competitive pressures, low liquidity, and election-year uncertainty.

Statistics by IMF reveal that the real Gross Domestic Product (GDP) in 2013 was estimated at just above three percent, sharply down from 10,5 percent in 2012.

The annual inflation rate decelerated from 2,9 percent in 2012 to 0,3 percent at the end of last year (and further -0,5 percent in February 2014), reflecting weak domestic demand and the depreciating South African rand.

The external account deficit widened in 2013, and reserves remain significantly below adequate levels while fiscal policy last year was challenged by election-related spending pressures and higher-than-budgeted employment costs.

Government’s economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) — which has been described by analysts as a pie in the sky — has failed to excite the market.

The blueprint, which requires$27 billion to be successfully implemented, risks suffering a stillbirth due to lack of funding.

Finance minister Patrick Chinamasa’s efforts to seek external funding were recently shot down by the IMF, the World Bank and China.

Comments (5)

This is falling on deaf ears. They are already amassing the little we have so that they and their families will survive whilst we perish.

Maita Manyuka - 28 March 2014

IM what?? That Cuevas and his horde of Havard educated pinbrains have no clue about economic turnarounds, they lied about ESAP, they lied about Latin American economic woes, the IMF is bankrupt and defunct anyway, thats why I met him at Beijing airport, I wonder if he had gone to see the great wall!!!

Don Wezhira - 28 March 2014

Mr Wezhira may be right, the IMF may be 'pinbrains with no clue', but they are the ones who have the money. Insulting them is unlikely to make them want to give you any.

Andrew Lale - 28 March 2014

Yes things may be tough , but we will survive and through as Zimbos , we are survivors its in our DNA and God is on our side . At times the expects might be wrong

Tsvaitsvai - 28 March 2014

In the past the IMF has given Zimbabwe a lot of economic advice and a lot of cash. Now it still gives the same advice "implement reforms" but no cash. The IMF did not drop even a single dollar into Mugabe's $27 billion ZimAsset begging bowl. Not even a cent so the tyrant can have something to rattle the bowl with! One can not blame the IMF, in the past the Zanu PF regime took the money but ignored the advice. The IMF has since learnt the lesson. Whilst Mugabe has refused to take listen to advice on cutting the size of the bloated civil service he has started to do something about the rampant corruption. Mugabe will be forced to implementing all the other reforms too one way or the other because the national economy is in serious trouble! It is either he implement the reforms or someone else will - not implementing the reforms is no long an option!

Wilbert Mukori - 29 March 2014

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