IMF: Zimbabwe Facing Economic Downturn
The international finance organization concluded that these challenges require strong macroeconomic and financial policies, an enabling business environment, and normalized relations with creditors.
WASHINGTON — "Zimbabwe’s external position remains precarious, with usable international reserves covering less than two weeks of imports. The current account deficit widened to 28.7 percent of GDP in 2013, as the trade deficit deteriorated, reflecting lower mineral exports. The main financing item in the capital account was private loans. "Fiscal pressures continued into 2014, with the budget targets in doubt in the context of sluggish growth and a 14- percent increase in the wage bill relative to 2013. To offset these pressures, the government has identified various revenue and expenditure measures valued at some 4.6 percent of GDP in 2014. If fully implemented, these measures could result in a reduction in the 2014 budget deficit to 0.6 percent of GDP, consistent with the available financing." IMF directors took note of the staff’s assessment that the real exchange rate is overvalued. "They underscored the importance of addressing structural bottlenecks to boost competitiveness and promote a sustainable external position, and highlighted the need to improve the business environment and basic infrastructure." It further said, "The directors also saw a need to reduce uncertainty regarding the indigenization policy, including in the financial sector, to avoid deterring investment." IMF directors urged the authorities to fully implement the recent measures to boost transparency in the diamond sector and to modernize mining legislation.