Africa Moyo Deputy News Editor
THE International Monetary Fund (IMF) has pledged to continue working with the Government to foster economic stability.
This was said yesterday by IMF’s Mr Gene Leon, who led a team from that institution which was in Zimbabwe from September 5 to 19 to conduct the Article IV Consultation and review progress under the Zimbabwe’s Staff-Monitored Programme (SMP).
Mr Leon said further engagements with Zimbabwean officials were expected to take place during IMF and World Bank annual meetings set for October 14 to 20 in Washington D.C.
“The IMF staff and the authorities have agreed to maintain close and continuous dialogue in the coming weeks on economic policies to restore economic stability while accommodating spending to alleviate food insecurity and protect vulnerable groups,” said Mr Leon.
“Our dialogue with the Zimbabwean authorities is anticipated to continue during the IMF and World Bank Annual Meetings, taking place October 14-20, 2019.
“The (IMF) team is grateful to the authorities for their frank and open discussions on economic policy options.”
During its engagements with Zimbabwean officials, the IMF mission met President Mnangagwa, Finance and Economic Development Minister Professor Mthuli Ncube, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya, other senior officials, MPs, representatives of the private sector, civil society, and development partners.
Discussions between Government officials and the IMF team covered recent economic developments, the near and medium-term outlook, risks to the economy, developments in the financial sector, and the set of economic policies required to restore stability and build the foundations for strong, sustainable, and balanced growth.
Mr Leon said they had “productive discussions” with Government authorities related to the 2019 Article IV consultation and performance under the SMP.
“In this context, the authorities have reiterated strong policy commitments to implement much needed reforms to restore stability, strengthen social protection, meaningfully improve transparency, improve FX (foreign exchange) policies and the monetary policy framework, and lay the foundations for a sustainable job-creating growth path.
“The authorities and staff both acknowledge the complex macroeconomic environment in which these reforms are being undertaken, with Zimbabwe facing the impact of a severe drought and its external arrears preventing access to traditional avenues of external financing,” he said.
Mr Leon said economic difficulties have continued throughout 2019, exacerbated by “severe weather shocks” and Gross Domestic Product growth this year is expected to be negative as the effects of drought on agricultural production and electricity generation, impact of Cyclone Idai, and the significant fiscal consolidation to correct past excesses, serve to drag on growth.
Due to a poor agricultural output because of erratic rains in the 2018/2019 summer cropping season, about 8,5 million people are estimated by the United Nations to be food insecure.
Mr Leon said policy actions were urgently needed to tackle the root causes of economic challenges obtaining in the country, and enable private-sector led growth.
“The key challenge is to contain fiscal spending consistent with non-inflationary financing and tighten monetary policy to stabilise the exchange rate and start rebuilding confidence in the national currency.
“Risks to budget execution are high as demands for further public sector wage increases, quasi-fiscal activities of the RBZ that will need to be absorbed by the central Government, and pressure to finance agriculture could push the deficit back into an unsustainable stance,” said Mr Leon.
The IMF wants efforts to be intensified on both economic and political fronts to drive Zimbabwe forward.