IMF Executive Board Concludes 2022 Article IV Consultation with Zimbabwe


Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation [1] with Zimbabwe on March 21, 2022.

Zimbabwe experienced severe exogenous shocks (cyclone Idai, protracted drought, and the COVID-19 pandemic) during 2019-20, which along with policy missteps in 2019, led to a deep recession and high inflation. Real GDP contracted cumulatively by 11.7 percent during 2019-20 and inflation reached 837 percent (y/y) by July 2020. The authorities’ swift response to the pandemic, including through containment measures and economic and social support, helped contain its adverse impact. Pandemic-related spending, equivalent to 2 percent of GDP, in 2020 was financed by reallocation within the budget. In 2021, such outlays represented about 1.6 percent of GDP, partially financed by the SDR allocation. In addition, expenditures were increased to bolster food security and farm inputs to vulnerable households. The Reserve Bank of Zimbabwe introduced a medium-term bank accommodation lending facility and private sector lending facility.

Real GDP rose by 6.3 percent in 2021 reflecting a bumper maize harvest, strong pickup in mining, and buoyant construction. A tighter policy stance since mid-2020 (relative to 2019) has contributed to lowering inflation to 60.7 percent (y/y) at end-2021. Fiscal policy was tightened in 2020‑21, reflecting increased revenues and lowered spending. The current account balance turned into a surplus during 2019-21, reflecting favorable metals’ prices, lower imports, and a surge in remittances. However, high double-digit inflation and wide parallel foreign exchange market premia have persisted. Poverty has risen and about a third of the population is at risk of food insecurity.

The output recovery that resumed in 2021 is expected to continue, albeit at a slower pace, with growth projected at about 3½ percent in 2022 and 3 percent over the medium term in line with Zimbabwe’s growth potential. The authorities aim to limit the 2022 budget deficit at 1½ percent of GDP, and below 2 percent of GDP over the medium-term. At the same time, the current account surplus is expected to decline over the medium term, reflecting a pickup in imports and slowdown in remittances. The effects from the COVID-19 pandemic and protracted drought have compounded existing structural constraints and would lead to scarring on the economic outlook.

International reengagement has lagged as stakeholders seek political and economic reforms. The 2019 Staff-Monitored Program experienced significant policy slippages and elapsed without a review. Since then, the authorities have made significant progress towards restoring macroeconomic stability, though the implementation of past IMF policy advice has been mixed. The authorities have developed a debt resolution strategy and started token payments to creditors in a bid to make progress on reengagement.