IMF expects Zimbabwe’s economy to grow

Zimbabwe is on the path to economic recovery, with a growth forecast of 6% expected this year due largely to a bumper maize harvest, the IMF said on Thursday.

The positive outlook comes after an IMF team led by Dhaneshwar Ghura conducted a virtual staff visit with the Zimbabwean authorities from June 1 to June 14, to assess the state of the economy.

“An economic recovery is under way in 2021, with real GDP expected to grow by about 6%, reflecting a bumper agricultural output, increased energy production and the resumption of greater manufacturing and construction activities,” the IMF said in a statement.

The IMF forecast is 1.4 percentage points shy of the 7.4% growth forecast by the government. Zimbabwe has been in economic doldrums for the past two decades, battling to contain inflation, which reached a second peak at 837% in July last year and is now just below 200% up to May.

Those efforts could still come to naught as it is expected to go up again after the Reserve Bank of Zimbabwe introduced measures to force businesses to peg the exchange rate to the official auction market, instead of the popular black market in June.

The directive has led to the prices of some basic goods going up 50%- 100%.

The IMF mission said that though it had noted the efforts by monetary authorities in Zimbabwe to stabilise the local currency and lower inflation, it was worried that “uncertainty remains high”.

“Further efforts are needed to solidify the stabilisation trends and accelerate reforms,” it said.

“Uncertainty remains high, however, and the outlook will depend on the pandemic’s evolution, the pace of vaccination and implementation of sustainable policies,” the IMF said.

Harare-based economist Prosper Chitambara said the growth prospects were expected. “Zimbabwe’s economy largely relies on agriculture so growth was inevitable, given that we are going to have a bumper harvest.

“The bumper harvest will mean that the government will save on about US$300m that would have been spent on food imports. However, he noted that blighted”by rising prices. the growth forecast could be

“We will have to see in time if the recent price hikes that have been witnessed in the past weeks will not lead to another bout of inflation that will affect growth,” he said.

The tobacco crop also did well after a season of good rains. Grown mostly for export, tobacco is expected to earn nearly US$1bn in 2021 after last year’s US$782m. Zimbabwe is the second-largest exporter of flue-cured tobacco in the world after Brazil.

Platinum group metals are expected to bring in close to US$2bn. Gold, diamonds and other minerals are expected to earn about US$1bn. Zimbabwe is the second-largest platinum miner after SA.

The IMF said Harare cleared its arrears with the Bretton Woods institution, but cannot get loans due to huge debt overhangs with creditors such as the World Bank and the African Development Bank.

“Zimbabwe has been a fund member in good standing since it cleared its outstanding arrears to the IMF in late 2016. The IMF is precluded from providing financial support to Zimbabwe due to unsustainable debt and official external arrears.”

The country has been battling to get loans to resuscitate the economy amid high unemployment and currency depreciation against the US dollar. Officially, the US dollar is equal to about $85 local Zimbabwe currency, but on the black market the greenback is equal to about $130, leading to market distortions and price instability.

Zimbabwe’s government last Saturday slashed working hours for business and ordered companies to send 50% of their staff to work from home as part of new measures to curb the spread of Covid-19.

THE BUMPER HARVEST WILL MEAN THAT THE GOVERNMENT WILL SAVE ON US$300M THAT WOULD HAVE BEEN SPENT ON FOOD IMPORTS

Prosper Chitambara Harare-based economist