People walk past the Reserve Bank of Zimbabwe building in Harare, Zimbabwe, on February 25 2019. Picture: REUTERS/PHILIMON BULAWAYO
People walk past the Reserve Bank of Zimbabwe building in Harare, Zimbabwe, on February 25 2019. Picture: REUTERS/PHILIMON BULAWAYO

Zimbabwe’s economy faced a steep economic contraction this year, with the country’s year-on-year inflation having soared up to 300%, the International Monetary Fund (IMF) said on Thursday.

Zimbabwe’s inflation is the highest in the world after Venezuela and government from July suspended presenting year on year inflation data in what seemed to be a calculated attempt to conceal the revealing figures.

The last inflation data released by the Zimbabwe Statistical Agency put inflation at 175,6% in June.

An IMF delegation was recently in Zimbabwe to assess progress on implementation of a Staff Monitored Program (SMP) that monitors economic performance and the country’s commitment to reforms.

In a statement released on Thursday, IMF head of delegation Gene Leon said the country was experiencing severe economic difficulties.

“GDP growth in 2019 is expected to be steeply 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.”

Gene said policy uncertainty on the part of Zimbabwe’s government and rampant distortions on the foreign exchange market had spiked the fresh rise in inflation.

“Since the February currency reform, the exchange rate has depreciated from USD 1:1 ZWL to USD 1:16.5 ZWL (as of September 23), fostering high inflation, which reached almost 300% (year-over-year) in August.”

The soaring inflation has led to widespread suffering of the people, whose wages have been eroded by the rate spiralling rate of prices of basic goods.

Zimbabwe is undergoing IMF’s SMP, which is an informal program that does not provide funding but aims to implement a coherent set of policies that can facilitate a return to macroeconomic stability.

Successful implementation will assist in building a track record and facilitate Zimbabwe’s financial reengagement with the international community.

The southern African country does not qualify for funding from Bretton Woods Institutions as its external public and publicly guaranteed debt stands at US$8.5bn .

Multilateral institutions are owed US$2.5bn. Of this the World Bank is owed US$1.5bn , African Development Bank US$702m, European Investment Bank US$309m and other multilaterals US$74m..