…..ZiG Ends Zimbabwe’s Macroeconomic Instability, IMF says
By Harry Taruva and Delicious Mathuthu
Harare, Zimbabwe – In a positive turn of events, the International Monetary Fund (IMF) has expressed optimism about Zimbabwe’s economic prospects, despite the country facing significant headwinds.
An International Monetary Fund (IMF) staff team headed by one Wojciech Maliszewski recently conducted a second mission to Harare between June 18 and 27, 2024, to conclude its 2024 Article IV Consultation .After the recent visit, the Fund released a report through its Media Relations Press Officer Julie Ziegler ,painting a positive picture on the effects of the country’s new Currency.
The IMF’s latest 2024 preliminary report reveals that Zimbabwe’s economy is expected to decelerate by 2% in 2024 from just over 5% in 2023 due to drought.
The 2% expected growth is driven by a rebound in agriculture and ongoing capital projects in manufacturing expected to grow by 6% next year, 2025.
“Despite headwinds, Zimbabwe’s economy continues showing resilience. Growth is expected to decelerate to about 2 percent in 2024 (from 5.3 percent in 2023), as the country faces a devastating El Niño-induced drought.
“Higher import bills are also worsening the balance-of-payments outlook. But growth is expected to recover strongly in 2025 to about 6 percent, supported by a rebound in agriculture and ongoing capital projects in manufacturing,” Maliszewski says.
The report highlights the introduction of the new currency, the Zimbabwe Gold (ZiG), which has stabilized the exchange rate and ended macroeconomic instability.
“Against this background, the Reserve Bank of Zimbabwe (RBZ) introduced in April 2024 a new currency, the Zimbabwe Gold (ZiG).
“The ZiG official exchange rate has so far remained stable, ending a bout of macroeconomic instability in the first 3 months of the year (when the Zimbabwean dollar depreciated by about 260 percent).
“Assuming that macro-stabilization is sustained, cumulative inflation in the remainder of the year is projected at about 7 percent,” IMF says.
The IMF praises the Reserve Bank of Zimbabwe’s (RBZ) efforts to improve monetary policy discipline and recommends further refinements to the policy framework.
The report also emphasizes the importance of closing the fiscal financing gap to sustainably stabilize the currency.
The transfer of past debt obligations to the Treasury and enhanced coordination between the RBZ and the Ministry of Finance have been seen as positive steps towards strengthening financial discipline.
Structural reforms aimed at improving the business climate, strengthening economic governance, and trying to reduce corruption vulnerabilities are also underway, the internation body said.
International reengagement remains critical for debt resolution, it said, and arrears clearance, which would open the door for access to external financing.
The IMF conducted meetings with the Minister of Finance, Economic Development and Investment Promotion Professor Mthuli Ncube, his Deputy Honourable David Mnangagwa and his Permanent Secretary George Guvamatanga; Reserve Bank of Zimbabwe Governor Dr. John Mushayavanhu; the Chief Secretary to the President and Cabinet, Dr. Martin Rushwaya; other senior government and RBZ officials including Members of Parliament and representatives from the private sector, civil society and Zimbabwe’s development partners.
Zimbabwe has been battling hyper inflation for more than 20 years and it remains to be seen whether the country’s new currency will last the distance amid concerns about the lack of tangible immediate benefits of the currency on the citizens.
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