eBusiness Weekly
Business Writer
COVID-19 will adversely impact the economic outlook for Zimbabwe that also require additional health-related spending
and international support, the International Monetary Fund (IMF) has said in its 2019 Article IV Consultation full report released today (Friday).
The global lender said COVID-19 will make it even harder to balance the policies needed to restore macroeconomic stability with those to address urgent social needs.
The Staff Report, whose executive summary was released early this year, reflects discussions with the Zimbabwe authorities in September and December 2019 and is based on the information
available as of February 12, 2020.
It focuses on Zimbabwe’s near- and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic that has resulted in unprecedented strains in global trade, commodity, and financial markets.
It, therefore, does not reflect the implications of these developments and related policy priorities.
“While highly uncertain at this stage, it is clear that COVID-19 will adversely impact the economic outlook for Zimbabwe and require additional health-related spending
and international support.
“COVID-19 will make it even harder to balance the policies needed to restore macroeconomic stability with those to address urgent social needs,” reads part of the report.
However, the outbreak has greatly amplified uncertainty and downside risks around the country’s outlook.
The IMF said it is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Zimbabwe and globally.
Before COVID-19, the outlook for 2020 was near-zero growth and gradual disinflation.
“For 2020, the economy is expected to remain basically flat as agriculture fails to
rebound from the previous drought year, electricity generation endures another year of low rainfall, and fiscal adjustment continues.”
The IMF said with grain stocks already depleted, a weak agriculture harvest would put additional pressures on the balance of payments for food imports.
The global lender said over the medium-term, continued external arrears and the consequent lack of access to external finance continue to constrain investment, and real growth, but eventually reduced fiscal deficits and a more flexible exchange rate regime will allow the economy to achieve some growth.
It, however, said without a resolution of Zimbabwe’s unsustainable external debt, the economy will not be able to grow at or near potential and there is little chance of the country reaching its targets.
Zimbabwe remains in debt distress, with long standing external arrears to IFIs, official, and commercial creditors.
The IMF said Zimbabwe’s external debt situation would worsen further in the event that the Government assumes
the liabilities from losses associated with the currency reform.
The global lender emphasized that this and continued recourse to collateralized external borrowing on commercial terms may potentially complicate any future arrears clearance operation for Zimbabwe.
“Restoring debt sustainability will require fiscal prudence across the public sector, as well as support for a debt arrangement by creditors,” it said.
Zimbabwe’s domestic debt has also grown in recent years due to large fiscal deficits and negligible access to external finance, but the recent currency conversion and high inflation have significantly eroded its real value.
