he International Monetary Fund (IMF) on Tuesday lauded Zimbabwe’s efforts to stabilise the foreign exchange rate and lower inflation amid significant internal and external shocks.
Zimbabwe’s economy had shown resilience in the face of significant shocks such as poor rainfall and price pressures against the background of the COVID-19 pandemic, the IMF said in a statement issued Tuesday after the conclusion of its staff visit to Zimbabwe from Sept. 12-19.
“The IMF mission notes the authorities’ efforts to stabilize the local foreign exchange market and lower inflation. In this regard, the recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap,” IMF team leader Dhaneshwar Ghura said.
The renewed price and exchange rate depreciation pressures emerged in the second quarter of 2022, with inflation in August reaching 285 percent year on year.
After recording a growth rate of 7 percent in 2021, real GDP growth is expected to decline to about 3.5 percent in 2022, reflecting a slowdown in agricultural and energy outputs owing to erratic rains and rising macro-economic instability, amidst a recovery in mining and tourism, Ghura said.
He said uncertainty remains high and the outlook will depend on the evolution of external shocks, the policy stance, and the implementation of inclusive growth-friendly policies.
The Zimbabwean government has put in place a raft of measures to stabilize the exchange rate and curb inflation, among them introducing gold coins and raising the bank policy rate from 80 percent in April to 200 percent in June 2022.
The IMF said further efforts were needed to durably anchor macroeconomic stability and accelerate structural reforms.
“The near-term macroeconomic imperative is to curb inflationary pressures by further tightening monetary policy, as needed, and allowing greater exchange rate flexibility through a more transparent and market-driven price discovery process, tackling foreign exchange market distortions and eliminating exchange restrictions,” he said.