Zim economy to regress further: IMF

HARARE - Zimbabwe's economy is set to slump further this year due to continued decline in global commodity prices, fiscal challenges, and possible difficulties in policy implementation, the International Monetary Fund (IMF) has said.

This comes as the Bretton Woods institution had earlier predicted that Zimbabwe’s economy would grow by 2,8 percent this year compared to 3,1 percent registered in 2014.  In a report accompanying its review of the country’s Staff Monitored Programme (SMP) released on Tuesday, the IMF said Zimbabwe’s external position remains precarious.

“Growth has slowed and is expected to weaken further in 2015. Despite the favourable impact of lower oil prices, the country is in debt distress,” said IMF.

Zimbabwe owes close to $10 billion in external debt, half of it in arrears and the country has not received financial support from the IMF, World Bank and African Development Bank since 1999 due to policy differences between President Robert Mugabe and the West.

The southern African country’s economy is slowing down due to lack of foreign investment, electricity shortages and expensive loans. Cheaper imports are damaging local industry, forcing firms to close.

“Despite economic and financial difficulties, the Zimbabwean authorities have made progress in implementing their macroeconomic and structural reform programmes, particularly regarding clarifying the indigenisation policy, restoring confidence and improving financial sector soundness, and strengthening public financial management,” said IMF.

The Bretton Woods Institution also noted that Zimbabwe’s re-engagement with external creditors would open the way for further constructive dialogue to identify feasible options for clearing the arrears to these institutions — a key step towards seeking rescheduling of bilateral official debt under the umbrella of the Paris Club.

Zimbabwe began an IMF-administered SMP almost three years ago, which constitutes crafting a road-map for building a strong track record towards normalising the relations with creditors.

The programme is aimed at strengthening Zimbabwe’s external position as a prerequisite towards arrears clearance, normalisation of debt servicing, and restoring access to external financing.

This will in turn require further fiscal consolidation to rebuild the country’s capacity to

repay debts, restoring financial stability and mobilising international support for resolving the country’s external debt situation.

Economic experts say a strong performance under the SMP would improve Zimbabwe’s repayment capacity and demonstrate that it can implement reforms.

The IMF forecast comes a week after brokerage firm, Invictus Capital (Invictus), predicted the country’s economy was entering its bleakest phase since the 2008 hyperinflationary period, with a four percent economic slowdown expected in 2015, on the back of suppressed Foreign Direct Investment (FDI) inflows and weak mineral prices.

Invictus projected a weak outlook for the year sighting poor performance by the country’s economic drivers, mining and agriculture.

Comments (5)

The problem of Zimbabwe is Mugabe, who is clueless in economic management of the country. If he is not clueless, then he is very cruel. Otherwise on this so called indegenisation: who in his sober mind would allow sharing the proceeds of his investment with someone who has not invested anything? Looking closely, it is this art of dishing out things for free that has killed the economy of the country. When Gono was at RBZ, he took foreign currency and bought farming equipment that he dished out to chiefs, headman and Zanu members for free. Zupco and NRZ are all grounded because of giving free transport services to political groupings related to Zanu. The day when I discovered that Mugabe was dangerous to the economy of the country was when he was interviewed on ZTV, and he said "I see nothing wrong in printing money for building a dam, since that dam project will be able to repay the money bank in future". My heart bled. Mugabe did not even know the dangers of printing money, even if the money is loaned and later be repaid. I hope now he knows the consequences of it - permanent destruction of domestic currency. And now Mugabe says the country is able to pay the bonuses, when infact Chinamasa says even the monthly salaries for civil servants may be difficult to pay in the near future, unless Chinamasa raises the income tax of the few remaining workers and companies in the country. But this would again backfire. If Mugabe knew the factors affecting inflow of foreign investment, he would not have coined the Indegenisation law. Or does Mugabe really care for the people of Zimbabwe who are at his mercy? Why then allow them to suffer like this? Or does Mugabe think his life alone is more important than the whole country?

Danai Pazvagozha - 23 April 2015

these populist policies were tried by Idi Amin , taking over Asian businesses and trying to fix the British. the Ugandan economy fell until he fled the country and died in exile. Here in Zim, the USD which we are using cannot be printed and hence , as long as we continue to implement our populist policies the American currency shall continue to go to markets where it is respected and the economy shall crush to a halt. Watch this space, i might not be a prophet but here my prediction ' I saw our leaders running away from ZIM becoz of the looming crisis or the gvt leader dying of stress.'

Big Meech Larry Hoover - 24 April 2015

In 1977, when Britain broke diplomatic relations with Uganda, Amin declared he had defeated the British and added "CBE", for "Conqueror of the British Empire", to his title. Radio Uganda then announced his entire title: "his Excellency President for Life, Field Marshal Alhaji Dr. Idi Amin Dada, VC, DSO, MC, CBE".Isnt this typical to the titles we are now using in calling our President (Commander in Chief,Head of Gvt & State) ,who doesnt know that the President of Zim is the head of state & Gvt. The economy is going to shrink and shrink more whilst its tiring leader is seeking power and more power instead of working together with all nations across the globe by improving policies.

Big Meech Larry Hoover - 24 April 2015

It is about time to abandon the indegenisation law and amend labour law otherwise, no hope !

zimbo - 24 April 2015

The truth is taneta nekutongwa nemunhu one. Enough is enough. Even if a frog can come to rule us it will be better.

Handiti - 28 April 2015

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