A visiting International Monetary Fund (IMF) team says policies forcing retailers to use the formal exchange rate are hampering economic growth.

According to the team, such policies” promote informality, thereby eroding the tax base and undermining longer-term growth projections.

The world financial institution adds that economic activity in the country “continues to exhibit resilience in the face of currency instability” though “risks remain skewed to the downside”.

According to the IMF, the economy grew by 5.3% last year, and growth will slow to 3.25% this year due to drought and low commodity prices.

Presenting the 2024 National Budget in November last year, Finance and Economic Development Minister Professor Mthuli Ncube said economic growth is this year anticipated to slow down due to the El Nino phenomenon and declining mineral commodity prices.

Apparently, the United Nations (UN) estimates that Zimbabwe’s economy will grow by more than three percent despite various challenges.

The UN revealed in its latest report on Global Economic Prospects that Zimbabwe’s economy will rebound in 2025.

It stated that improvements in mineral production, the construction sector, tourism, and manufacturing as well as agriculture will further boost the overall value of goods and services.

However, the UN forecast is slightly lower than the 3, 5 percent target by the Treasury.

Findings within the report show that Zimbabwe has to guard against the effects of the El Nino-induced drought, public debts and subdued investments among other economic shocks.

IMF Statement on Zimbabwe’s Economic Outlook and Policy Recommendations

Key points from the statement:

  1. Economic resilience despite currency instability and high inflation, with estimated GDP growth at 5.3% in 2023, driven by agriculture, mining, and foreign currency inflows.

  2. Projected GDP growth to decelerate to around 3.25% in 2024 due to drought and lower commodity prices, affecting agriculture and foreign currency inflows.

  3. Despite a small surplus in the current account, local currency instability persists, impacting sentiment and promoting informality.

  4. Authorities’ request for a Staff Monitored Program (SMP) to support stabilization efforts and engage with the international community.

  5. Discussions focused on restoring macroeconomic stability, addressing fiscal pressures, liberalizing the foreign exchange market, and improving economic governance.

  6. Transfer of Reserve Bank of Zimbabwe’s external liabilities to the Treasury is seen as positive, but servicing costs may create a budget gap in 2024.

  7. Encouragement for FX market reform, including transparent pricing and removing exchange restrictions.

  8. Structural reforms aimed at improving the business climate, governance, and reducing corruption vulnerabilities are crucial.

  9. Resolution of the debt overhang is essential for sustainable development, with international reengagement efforts being critical.

  10. IMF’s active engagement with Zimbabwe, providing policy advice and technical assistance, but unable to provide financial support due to unsustainable debt and official external arrears.

  11. Meetings held with key government officials, private sector, civil society, and development partners, with gratitude expressed for constructive discussions and support.

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