Press Release No. 09/376
A staff team of the International Monetary Fund (IMF), led by Vitaliy Kramarenko, visited Harare during October 14-26, 2009 to review progress in implementation of the government's Short-Term Economic Recovery Program (STERP) and assist the government in the preparation of the draft 2010 budget and the underlying macroeconomic framework. IMF staff met with Finance Minister Biti, Economic Development and Investment Promotion Minister Mangoma, Reserve Bank of Zimbabwe Governor Gono, and other senior officials, as well as representatives of the financial, business, and diplomatic communities.
At the conclusion of the mission's work, Vitaliy Kramarenko made the following statement:
"The economy has begun to recover in 2009, albeit from a low base. Since early 2009, the government has broadly adhered to cash budgeting, achieved a significant improvement in budget revenue, established a multi-currency system, and largely liberalized prices and the exchange system. As a result of these improved policies, real GDP is projected to grow by about 3 percent. Credit expansion, led by post-hyperinflation remonetization and capital inflows, is supporting economic activity. However, it is also contributing to a large external current account deficit and increased credit and liquidity risks in the banking system.
"The key challenge going forward is to build the necessary support for policies that would ensure sustainability of the nascent economic recovery and improvements in living conditions for Zimbabweans. Specifically, political consensus needs to be forged for continuing cash budgeting, exercising wage restraint while reorienting expenditures to developmental needs and priority social programs, resolving RBZ governance problems and restructuring its balance sheet, enforcing the property rights, and maintaining the rule of law. In light of Zimbabwe's debt overhang and low-income status, the mission advises the authorities to seek sustained concessional donor financing in support of their medium-term growth and poverty reduction objectives rather than relying on non-concessional SDR-related funds. The SDR allocation provided an important one-off boost to Zimbabwe's depleted international reserves, and should be saved. In the banking system, there is a need to step up supervisory efforts in monitoring liquidity and credit risks.
"IMF staff will continue to provide policy advice and targeted technical assistance in the context of regular visits. Access to IMF lending facilities would require a sustained track record of sound policies and donor support for the clearance of arrears to official creditors.
"The mission would like to thank the Zimbabwe authorities for excellent cooperation and warm hospitality."
IMF EXTERNAL RELATIONS DEPARTMENT