THERE is no respite in sight for long-suffering Zimbabweans, with the International Monetary Fund (IMF) joining other important bodies this week in warning that the country is headed for a mega economic and humanitarian crisis, the Daily News reports.
Rather damningly, the IMF — one of the few key international organisations that have not been outrightly hostile to Harare — has also pooh-poohed President Emmerson Mnangagwa’s political reforms to date, as well as the fiscal policies of the increasingly under pressure Finance minister, Mthuli Ncube.
And just as worryingly for Mnangagwa, his government and desperate citizens, the IMF has also expressed a dim view of Zimbabwe’s governance systems and its commitment to dealing with the country’s high corruption levels.
All this comes as Zimbabwe is experiencing a ginormous economic crisis which has been exacerbated by a mega regional drought that has crippled local agriculture — further raising political tensions in the already jittery country.
It also comes as the country continues to experience skyrocketing inflation, as well as debilitating shortages of water, power, fuel, critical medicines and foreign currency — among a myriad other challenges — with the recently introduced Zim dollar still on a steep one-way ticket down on the rampaging black market.
This has seen the prices of basic goods in the country hitting the roof, and climbing to levels that are well beyond the reach of the majority — while more than half of the country’s population is facing starvation, with yet another poor harvest expected this year.
In an update on Zimbabwe’s economy that was released on Wednesday, after meeting local authorities — as the global lender and capacity development organisation continues to try to help crisis-ridden Harare — the IMF said bluntly that worse days lay ahead for the country, largely because of the government’s hesitant implementation of much-needed reforms.
“Executive Directors (of the IMF) noted with concern that Zimbabwe is facing an economic and humanitarian crisis, exacerbated by policy missteps and climate‑related shocks.
“These would require difficult policy choices from the authorities and support from the international community.
“Directors urged the authorities to make a concerted effort to ensure economic and social stability through the adoption of co-ordinated fiscal, monetary and foreign exchange policies, alongside with efforts to address food insecurity and serious governance challenges,” the IMF said without mincing its words.
“They emphasised the importance of re-engagement with the international community to support efforts to achieve economic sustainability and address the humanitarian crisis.
“Notwithstanding (Zimbabwe’s) efforts in 2019 to tighten the fiscal stance and contain quasi‑fiscal operations by the central bank, Directors noted that pervasive deficits remain and could be exacerbated by the need to respond to the humanitarian crisis.
“Directors called for non‑essential spending cuts, including decisive reforms to agricultural support programmes, to allow for social spending needs,” the IMF added.
“They underscored the importance of public financial management and enhanced domestic revenue mobilisation efforts.
“Directors stressed that eliminating deficit monetisation would not only be crucial for fiscal sustainability, but it would also serve as a precondition for the stabilisation of hyper‑inflation and the preservation of the external value of the currency (Zim dollar).
“Directors noted that Zimbabwe remains in debt distress, with large external arrears to official creditors, and encouraged the authorities to give impetus to re-engagement efforts and debt management and transparency.
“In particular, they cautioned against continued recourse to collateralised external borrowing on commercial terms, as this may potentially complicate any future arrears clearance operation,” the IMF said further.
“Directors underscored the need to establish credibility in the new currency.
“They encouraged the authorities to press forward with the establishment of a functional foreign exchange market and to remove distortions that could lead to rent‑seeking behaviour in the economy.
“Directors agreed that given low reserves and hyper‑inflation, limited credibility, and a lack of access to traditional forms of external financing, a monetary targeting regime is appropriate to conduct monetary policy.
“Enhancing central bank independence and transparency, including by timely publication of monetary statistics, would be important,” the IMF added.
Perhaps even more worryingly for Mnangagwa and his government, the IMF expressed a dim view of Zimbabwe’s body politic, governance systems and commitment to dealing with the high local corruption levels.
“Directors stressed the need to address governance and corruption challenges, entrenched vested interests, and enforcement of the rule of law to improve the business climate and support private‑sector‑led inclusive growth.
“Such efforts would be instrumental to advance re-engagement efforts with the international community and mobilise the needed support.
“They noted with regret that the Staff‑Monitored Programme (an informal agreement between Zim and the IMF to allow for the monitoring of the implementation of Harare’s economic reform programme) was off‑track and underscored the importance of continued engagement between the Fund and the authorities, including through technical assistance, policy advice and other innovative ways, to help immediately stabilise the economy and address the humanitarian crisis,” the IMF noted grimly.
Zimbabwe, which is trying to shake off its international pariah tag, started defaulting on its foreign debt in 1999 — three years before the West imposed targeted sanctions on the country, as punishment against the late former president Robert Mugabe’s government, which was accused of electoral fraud and human rights abuses.
When Mnangagwa came to power in November 2017, following a stunning military coup which toppled Mugabe, he promised to follow sound macro-economic policies and to mend Zimbabwe’s relations with the Wester.