“The external account deficit widened in 2013, and reserves remain significantly below adequate levels. Fiscal policy in 2013 was challenged by election-related spending pressures and higher-than-budgeted employment costs,” says the IMF.
The Fund also highlighted that achieving Zimbabwe’s fuller growth potential over the medium term depends on pursuing strong macroeconomic policies, including by 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 said it will also be necessary to engage with the country’s creditors to work towards a solution to the long-standing debt arrears problem. Zimbabwe is said to have an external debt of about $7 billion, with 60 percent of it already in arrears. This result in the country paying a lot of regular interests for this debt, which also accumulates when defaulted.
“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 materialize, 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” says the Fund.
The Fund also indicated that although the Staff Monitored Programme provided a useful anchor for Zimbabwe’s economy in an election year; the electoral process and the transition to a new government affected the pace and scope of implementation of the policies and reforms under the program. The results of the elections held last year were not accepted by the opposition parties, which accused the ruling party of rigging the elections. Some of the members of the international community also did not accept the results of the election, saying the elections were neither free nor fair nor credible.
The Fund also highlighted that it made progress with the government in discussions towards an understanding on a package of policy measures and reforms to be monitored in the context of the Staff Monitored Program through June 2014. A Staff Monitored Program is an informal agreement between country authorities and Fund staff, whereby the latter agree to monitor the implementation of the authorities’ economic program.
“In order to enhance its interactions with Zimbabwe, the IMF intends to place a Resident Representative in Harare in the coming months” added the Fund.
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