repared for Zimbabwe’s latest two-week annual consultation with a six-member IMF delegation in December. It warns that without a fundamental policy turnaround, Zimbabwe faces a precipitous decline in activity and employment, hyperinflation and a rapid deterioration of bank loan portfolios that could worsen an already dire financial crisis. There is a serious risk of regional contagion, the Bretton Woods institution said.
The Zimbabwean authorities were grateful for the IMF’s “constructive role”, and considered the Article IV assessment fair, accurate and candid, Peter Gakunu, IMF executive director who led the consultative talks, said this week. Gakunu represents the African voting bloc, which includes Zimbabwe, on the fund’s board.
The report holds out hope that Finance Minister Herbert Murerwa and his team can reverse the economy’s decline if the government could muster the broad political consensus needed to stabilise the economy.
“It is still possible for Zimbabwe to regain its rightful status as an anchor of stability and prosperity in southern Africa”. Murerwa is applauded for “raising the awareness of public opinion about the size of the fiscal deficit and its root causes”.
The IMF said efforts were “hamstrung by continued policy weaknesses, dislocations and uncertainties related to the fast-track land resettlement programme, price and exchange rate distortions”.
The IMF has begun to push member states to permit the release of staff reports, but most countries still exercise their right to keep the documents confidential. Gakunu said Murerwa had authorised publication as part of his drive to enhance transparency.
Released with the report were the government’s responses to its recommendations, which include a return to the rule of law in implementing a land reform programme designed to garner domestic and international support.
In reply, Zimbabwean authorities stopped short of promising to uphold the law. They said enforcing the law would be facilitated if local commercial farmers and bankers, and international donors, provided concrete assistance for land acquisition, resettlement, and “broad agrarian reform”. Government also stated the issue of 99-year leases to farmers meant the land reform was now a “done deal.”
The IMF predicts that Zimbabwe’s real GDP will shrink by 10 percent this year and inflation will close the year at 4,500 percent. With changes factored in, they foresee a smaller, 6,5 percent contraction. With reform, they expect the economy to rebound in the coming years, with growth rising to about 5 percent in subsequent years.
HARARE - The cash-strapped Zimbabwe government has moved to restore its fiscal credibility and patch up relations with the International Monetary Fund (IMF) by allowing it to publish a searing analysis of Harare's "fiscal profligacy" and "governance problems" over the past year.
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