eBusiness Weekly
Business Writer
Zimbabwe’s economy is expected to grow by 6 percent in 2021, but authorities will have to double down on implementation of sustainable policies if the growth rate is to be achieved, the International Monetary Fund (IMF) has said.
Following a virtual staff visit with the Zimbabwe authorities, the global lender noted the resilience shown by the country in the face of the Covid-19 pandemic and other exogenous shocks.
It said the pandemic, on top of cyclone Idai in 2019, a protracted drought, and weak policy buffers took a severe toll on the economic and humanitarian situation.
This resulted in GDP contracting by 4 percent in 2020, after a 6 percent decline in 2019.
However, in 2021, the global lender projects an economic recovery with real GDP expected to grow by about 6 percent compared with a Government projection of 7.4 percent and almost double the World Bank’s projection of just 3.9 percent.
Just like government, the IMF attributes the economic growth on a bumper agricultural output, increased energy production, and the resumption of greater manufacturing and construction activities.
In agriculture, the country expects to produce nearly 3.1 million tonnes of cereal grains, including maize, sorghum, pearl and finger millet, according to the “Second Round Crop and Livestock Assessment Report 2020-21 Season” released by the Ministry of Lands, Agriculture, Fisheries, Water and Rural Resettlement early this year.
The Confederation of Zimbabwe Industries (CZI) anticipates a growth in the manufacturing sector’s capacity utilisation to a level of 60 percent in 2021, up from 47 percent in 2020.
Trading updates from construction sector related companies such as Willdale, PPC, Masimba, Lafarge also points to a surge in sales volume in line with IMF’s observation.
In terms of energy production, also seen by IMF as having increased, the country’s electricity generation for the first quarter to March 2021 was 34.92 percent above the output for the same period in 2020, according to the Zimbabwe Power Company’s 2021 first quarter update.
The IMF also commended efforts by authorities to stabilise the local currency and lower inflation.
While the local currency has experienced some turbulence on the parallel market, the overall impact has not been as bad as in the years past.
This is reflected in the slowdown in inflation to 161 percent at the last count in May 2021.
“The IMF mission notes the authorities’ efforts to stabilise the local currency and lower inflation. In this regard, contained budget deficits and reserve money growth, as well as the introduction of a foreign exchange auction system, are policy measures in the right direction,” the
IMF said in a post meeting statement issued by staff team leader Dhaneshwar Ghura.
Ghura, however, said further efforts are needed to solidify the stabilisation trends and accelerate reforms.
“Durable macroeconomic stability and structural reforms would bode well for the recovery and Zimbabwe’s development objectives.”
In line with the last Article IV consultation, the mission highlighted that structural reforms aimed at improving the business climate and reducing governance vulnerabilities are essential for ensuring sustained and inclusive growth.
“To this end, the authorities’ strategy and policies as embodied in their National Development Strategy need to be fully operationalised and implemented.”
Unfortunately, Zimbabwe’s well documented progress on economic reforms and its good standing with the IMF in terms of debts, having paid its dues in 2016, will not result in the country accessing any funding from the global lender.
The IMF says it is precluded from providing financial support to Zimbabwe due to unsustainable debt and official external arrears.
“A Fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and obtaining financing assurances from official creditors; a reform plan that is consistent with macroeconomic stability, growth and poverty reduction; a reinforcement of the social safety net; and governance and transparency reforms,” the IMF said.
The IMF staff held meetings with Minister Mthuli Ncube, Reserve Bank of Zimbabwe Governor John Mangudya, other senior government and RBZ officials, representatives of the private sector and Zimbabwe’s development partners.
