'Zim economy to regress further,' says IMF

Published: 21 June 2015
Zimbabwe's economy is set to slump further this year due to continued decline in global commodity prices, fiscal challenges, and possible difficulties in policy implementation, the International Monetary Fund (IMF) has said.

This comes as the Bretton Woods institution had earlier predicted that Zimbabwe's economy would grow by 2,8 percent this year compared to 3,1 percent registered in 2014.  In a report accompanying its review of the country's Staff Monitored Programme (SMP) released on Tuesday, the IMF said Zimbabwe's external position remains precarious.

"Growth has slowed and is expected to weaken further in 2015. Despite the favourable impact of lower oil prices, the country is in debt distress," said IMF.

Zimbabwe owes close to $10 billion in external debt, half of it in arrears and the country has not received financial support from the IMF, World Bank and African Development Bank since 1999 due to policy differences between President Robert Mugabe and the West.

The southern African country's economy is slowing down due to lack of foreign investment, electricity shortages and expensive loans. Cheaper imports are damaging local industry, forcing firms to close.

"Despite economic and financial difficulties, the Zimbabwean authorities have made progress in implementing their macroeconomic and structural reform programmes, particularly regarding clarifying the indigenisation policy, restoring confidence and improving financial sector soundness, and strengthening public financial management," said IMF.

The Bretton Woods Institution also noted that Zimbabwe's re-engagement with external creditors would open the way for further constructive dialogue to identify feasible options for clearing the arrears to these institutions - a key step towards seeking rescheduling of bilateral official debt under the umbrella of the Paris Club.

Zimbabwe began an IMF-administered SMP almost three years ago, which constitutes crafting a road-map for building a strong track record towards normalising the relations with creditors.

The programme is aimed at strengthening Zimbabwe's external position as a prerequisite towards arrears clearance, normalisation of debt servicing, and restoring access to external financing.

This will in turn require further fiscal consolidation to rebuild the country's capacity to

repay debts, restoring financial stability and mobilising international support for resolving the country's external debt situation.

Economic experts say a strong performance under the SMP would improve Zimbabwe's repayment capacity and demonstrate that it can implement reforms.

The IMF forecast comes a week after brokerage firm, Invictus Capital (Invictus), predicted the country's economy was entering its bleakest phase since the 2008 hyperinflationary period, with a four percent economic slowdown expected in 2015, on the back of suppressed Foreign Direct Investment (FDI) inflows and weak mineral prices.

Invictus projected a weak outlook for the year sighting poor performance by the country's economic drivers, mining and agriculture.
- dailynews
Tags: IMF,

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