eBusiness Weekly
Business Writer
The International Monetary Fund (IMF) predicts Zimbabwe’s external debt arrears will between 2022 and 2026 balloon to an average of US$13,3 billion from US$12,7 billion recorded last year.
This entails Zimbabwe’s economic woes will continue as the country’s unpaid external debt remains a threat to fresh access to credit lines from multilateral institutions.
The Southern African country continues to battle to clear its external debt to institutions such as World Bank and IMF.
“As under the baseline, external arrears would continue to accumulate, reaching about US$13,3 billion on average during 2022-26 (from US$12,7 billion at end of 2021).
“Financing gaps would emerge under staff’s Illustrative Active Policy Scenario (IAPS). The balance of payments gap under the IAPS is estimated at US$3,6 billion during 2022-26 (12,9 percent of 2022 GDP).
“Reserve buffers would increase to above three months of imports but remain below the recommended 5.4 months of imports for Zimbabwe,” said IMF in a statement released last week.
The multilateral financial institution further projects a gloom macro-economic outlook for Zimbabwe constrained by structural bottlenecks and insufficient financing.
Growth prospects are constrained by the limited fiscal space and non-inflationary financing options.
“The Reserve Bank of Zimbabwe (RBZ) continues to control base money. The large premier on the parallel forex market perpetuates rent-seeking opportunities and undermines external competitiveness. “The debt overhang imposes constraints on investment and growth. These included a widening of the Pay As You Earn (PAYE) tax base, improved risk management operations, and the digitisation of the tax payment platform,” it said.
It said the slow pace of structural reforms constrains FDI (Foreign Direct Investment) and sustainable growth.
“Despite a pickup in the services sector, real GDP (Gross Domestic Product) growth slows in 2022 to 3,5 percent, and about 3 percent thereafter in line with its current potential.
“The current account surplus declines in view of a slowdown in remittances and imports’ pickup.”
IMF said the effects from the Covid -19 pandemic and protracted drought have compounded existing structural constraints and lead to scarring on the economic outlook.
“Risks to the outlook are tilted to the downside. The pace of economic recovery is dependent on the evolution of the Covid -19 pandemic. Adverse climatic shocks could slow energy and agriculture production.
“Possible policy slippages, including in the run-up to the 2023 elections, could jeopardise macroeconomic stability and increase financial sector vulnerabilities,” it said.
Furthermore, commodity price volatility could adversely affect the external position and global inflation risks could compound domestic price pressure.
