HARARE – Zimbabwe is likely to achieve a 4 percent average growth rate for 2012 if its policy remains unchanged, the International Monetary Fund said in its annual review of the local economy.
The IMF figure comes on the back of a forced downward review of the country’s growth targets to 5,6 percent by Finance minister Tendai Biti in July on account of underperformance in agriculture and below-target diamond revenues trickling in from Marange mining operations.
“Real GDP growth in 2012 is projected to slow to five percent, reflecting the impact of adverse weather conditions on agriculture, erratic electricity supply, and tight liquidity conditions,” the Bretton Woods institution said.
“The medium-term outlook, under an unchanged policy scenario, is for growth to moderate ….., although constraints on energy supply and weak competitiveness may pose a challenge to achieving these rates.”
The IMF said Zimbabwe’s position would be worsened by its failure to clear external arrears which now stand at close to $11 billion.
“Zimbabwe remains in debt distress with total external debt estimated at $10,7 billion (113,5 percent of GDP) at end-2011, of which 67 percent of GDP are in arrears. The large debt overhang remains a serious impediment to medium-term fiscal and external sustainability,” the international funding group said.
“Directors agreed that addressing Zimbabwe’s large debt overhang and achieving external sustainability will require strong macroeconomic policies and a comprehensive arrears clearance framework supported by donors. They urged the authorities to refrain from further non-concessional borrowing and avoid selective debt servicing as these may complicate reaching agreement with creditors on a debt resolution strategy.”
The IMF said Zimbabwe’s usable international reserves remained very low at 0,3 months of imports at end-2011, amplifying its vulnerability to external shocks.
“The external position remained precarious, albeit with some recent moderation in the current account deficit. The current account deficit is projected to narrow to 20½ percent of GDP in 2012, as the 2011 import spike is reversed and exports continue to expand,” the report said.
It said a vigorous structural reform programme and strengthened macroeconomic management would allow the country to sustain higher rates of growth.
“To achieve sustained and inclusive growth, directors stressed the importance of full commitment to policies focusing on strengthening fiscal management, reducing financial sector vulnerabilities, and improving the business climate,” the report said.
“Directors urged the authorities to fully implement the measures announced in the mid-year fiscal policy review, and take additional measures if necessary, to address earlier slippages and close the financing gap.”
The African Development Bank in June also warned the country was unlikely to meet its projected growth targets due to tight liquidity, underperformance of the mining sector and an erratic power supply.
Zimbabwe is targeting a 7,1 percent average annual economic growth rate to 2015 in line with the Medium Term Plan (MTP).