IMF and AfDB give thumbs down to Zimbabwe’s reforms
The IMF says that the local currency is failing to get market confidence because of the uneven implementation of reforms
Harare — The International Monetary Fund (IMF) and the African Development Bank (AfDB) have given the thumbs down to Zimbabwe’s economic reform programme, saying that the country needs to do more to get out of its quagmire.
Zimbabwe is going through its worst economic crisis in a decade marked by triple-digit inflation, low wages and shortages of basics such as the staple mielie meal, fuel, and electricity.
President Emmerson Mnangagwa took office in November 2017 with promises to reform the economy, but hopes of a turnaround have dwindled.
In a statement after concluding a visit to the country this week, the IMF said Zimbabwe is experiencing an economic and humanitarian crisis, with macro-economic stability a challenge.
“The government that came to office following the 2018 elections adopted an agenda focused on macro-stabilisation and reforms. This was supported by a staff-monitored programme from the IMF, adopted in May 2019, but is now off-track as policy implementation has been mixed.”
Last year, Zimbabwe introduced a local currency that started trading at 2.50 with the US dollar but the unit has been on a precipitous fall and is now pegged at 28 to the dollar on the parallel market.
The IMF said that, although authorities have created an inter-bank foreign exchange market, the local currency is failing to get market confidence because of the uneven implementation of reforms.
“Directors underscored the need to establish credibility in the new currency. They encouraged the authorities to press forward with the establishment of a functional foreign exchange market and to remove distortions that could lead to rent‑seeking behaviour in the economy,” the IMF said.
Zimbabwe is not receiving external financial support in its reform agenda and the IMF said this was because the country has yet to define its arrears clearance plan and has also fallen short on solid reforms.
Corruption has been one of the major challenges upsetting Zimbabwe’s economy and the IMF urged the government to address it, as well as to enforce the rule to improve the business climate.
In a separate statement on Wednesday, following a visit by a seven-member delegation of its executive directors to Zimbabwe, the AfDB shot down the country’s reforms.
“The directors noted that despite some positive results, reform co-ordination in the country remains a challenge, against a backdrop of a continuing general rise in poverty levels, especially in the urban areas.”
The AfDB said Zimbabwe needs to normalise its relations with development partners to unlock more substantive external resources to fund its reform agenda.
Last month, the AfDB said Zimbabwe was accruing $1m in interest monthly as it battles to service its $700m owed to the bank. The country’s total external debt stands at $8bn with the bulk owed to the World Bank and Paris Club creditors.