'IMF report consistent with reality'

Published: 24 June 2014

Economic observers say the IMF report on Zimbabwe released yesterday is consistent with what is transpiring on the ground.

The IMF report highlighted several issues that are causing an economic slowdown, notably revenue underperformance, structural bottlenecks and a fragile global financial environment.

Economist Joseph Mverecha told BH24 that the concerns raised by the IMF were mainly related to a tight liquidity situation.

"The IMF Report following the recent Article IV is fairly consistent with conditions observable on the ground. Tight liquidity conditions persist, against the background of declining domestic aggregate demand and weakening external sector fundamentals.

"Financial intermediation – necessary for recovery and growth is hampered by both liquidity constraints and banking sector vulnerabilities. Accordingly distress conditions have widened across key industry sectors, with corresponding loss of fiscal revenues, aggravated by high local costs of doing business. This means that there are demand and supply structural issues underpinning the current decline in economic activity," he said.

In one of its key recommendations, the IMF said enhancing financial sector stability remains a priority and recommended continued vigilance in monitoring weak banks and a proactive approach to ensure "an orderly resolution of insolvent non-systemic banks."

The international financier also said restructuring and re-capitalising the Reserve Bank of Zimbabwe would help mitigate vulnerabilities.

Mverecha, however, maintained that Zimbabwean authorities are fully aware of the structural issues affecting the country and are in the process of handling them.

"The most important thing to remember though is that both the Minister of Finance and Economic Development Patrick Chinamasa and RBZ governor John Mangudya have already identified these structural issues and most importantly have articulated what needs to be done going forward.

"The minister has stated that, we need to engage our international development partners and international financial institutions and continue on the SMP as an integral aspect of an external arrears clearance programme so that Zimbabwe can again access concessional bilateral and multilateral financing," he said.

"Significantly, a number of proactive measures are still pending, but it seems to me that we are in the right direction. Much more still needs to be done. The journey to recovery and sustainable growth is long, but not impossible."

The IMF also acknowledged Government's commitment to continue implementing the policies and reforms agreed with the Fund under the Staff Monitored Programme (SMP) and to stay engaged with the international financial institutions.
- bh24

Tags: IMF,