The International Monetary Fund (IMF) has warned Zimbabwe about its debt overhang saying it was blocking new funds. The fund also revised its estimate for economic growth in Zimbabwe this year from 5.1 per cent to 6 per cent.
IMF had earlier projected that Zimbabwe’s growth for this year will go down from an earlier projected 6% to 5.1%.
The estimate is still lower than the Government estimate of 7.8 per cent.
The estimate came in preliminary findings by an IMF staff team led by Mr Dhaneshwar Ghura, Mission Chief for Zimbabwe, after concluding Article IV Mission to Zimbabwe through virtual meetings from October 25 to November 16. Mr Ghura said:
The IMF mission notes the authorities’ significant efforts to stem inflationary pressures. In this regard, contained budget deficits and reserve money growth, higher monetary policy rates, and more flexibility in the RBZ auction exchange rate, are policy measures in the right direction.
IMF also observed that Zimbabwe’s economy contracted cumulatively by about 11 per cent during 2019-20 owing to the combined effects of the pandemic, Cyclone Idai, a protracted drought, and weakened policy buffers.
Ghura said the envisaged GDP growth reflected a bumper agricultural output, increased mining and energy production, buoyant construction and manufacturing activity, and increased infrastructure development.
IMF also called on Zimbabwe to take decisive action to stem long-running economic turbulences, and warned that a big debt overhang would jeopardise efforts to secure fresh bailouts.
Zimbabwe has struggled to secure bailouts from international lenders since the IMF pulled the plug over its failure to settle arrears in 1999.
The fund reiterated that while Zimbabwe had cleared debts owed to it, the country was not getting fresh funding due to a high sovereign risk stemming out of an unsustainable debt burden estimated at over US$20 billion.