THE International Monetary Fund (IMF) will not give Zimbabwe any financial support despite the government having no arrears with the fund for almost five years.
Fund staff spent two weeks this month discussing the country’s economy with government officials, and said afterwards that Covid-19 has had a serious impact.
Following a destructive cyclone in 2019, a protracted drought and the pandemic have “taken a severe toll on the economic and humanitarian situation,” Dhaneshwar Ghura, who led the IMF staff team, said.
“Despite the authorities’ timely actions to support the most vulnerable groups and businesses during the pandemic, real GDP contracted by 4% in 2020, after a 6% decline in 2019,” he said.
A rebound of 6% is expected in 2021, according to IMF estimates, boosted by good crop yields, increased energy production and recovery in the manufacturing and construction sectors.
But although uncertainty remains high, Ghura said, with the outlook depending on Covid-19’s continued impact and the pace of vaccinations, the fund will limit itself to giving technical support and advice.
“Zimbabwe has been a fund member in good standing since it cleared its outstanding arrears to the IMF in late 2016,” he said.
“However, the IMF is precluded from providing financial support to Zimbabwe due to an unsustainable debt and official external arrears.”
Public and publicly guaranteed external debt stood at 83% of GDP in 2019, of which 61% of GDP was external arrears, according to a World Bank from earlier this month.
The size of its debt burden limit the government’s access to concessional finance (such as is the case with the IMF), the same report said, and coupled with “shallow” domestic financial markets this makes financing debt difficult.
“A fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears and obtaining financing assurances from official creditors,” said Ghura.
A plan of reforms aimed at fostering economic stability and growth, poverty reduction, governance improvements and boosting the social safety net would also be required, he said. ■