Reforms key for growth
The International Monetary Fund (IMF) completed its annual Article IV consultation on Zimbabwe this week making a candid assessment that the economy needs reforms to grow.
In its report, IMF Mission Chief to Zimbabwe, Dhaneshwar Ghura said decisive actions are needed to lock in economic stabilisation gains and accelerate reforms.
The near-term macroeconomic imperative is to continue with the close coordination among fiscal, exchange rate, and monetary policies, he said.
In this context, key priorities relate to allowing greater official exchange rate flexibility and tackling forex market distortions, accompanied by an appropriate monetary stance; creating fiscal space for critical spending while containing fiscal deficits; implementing growth-enhancing structural and governance reforms and continuing to enhance data transparency, the global lender said.
It said the reforms are paramount for improving the business climate and reducing governance vulnerabilities, and foster higher sustained and inclusive growth.
The IMF said Zimbabwe’s strategy and policies as embodied in their 2021-25 National Development Strategy 1 are appropriate and need to be fully operationalised and implemented. Durable macroeconomic stability and structural reforms would support the recovery and Zimbabwe’s development objectives, it said.
The IMF report comes at a time when there is a widening gap between the official and parallel market rate on the back of delays by companies to access the foreign currency allotted at the forex auction system.
Critics say the delays have fuelled the parallel market rate which is at ZWL$185 against the US$ versus ZWL$105.6965 on the auction system this week.
This huge disparity has led critics to question the efficacy of the foreign currency auction system accusing the platform of fuelling arbitrage.
The government responded this week with the Treasury availing resources for the central bank to clear the ring fenced backlog which will go a long in restoring confidence in the auction system.
This is a call business made some months ago that the auction system was failing to play its role as there were delays in accessing the funds allotted. The government has said it will use some of the resources from the special drawing rights to stabilise the local currency. In August, Zimbabwe got US$961m from the IMF as part of the global lender’s US$650bn package to assist its members.
The IMF was candid this week that the windfall is no substitute for reforms.
In this context, the use of the SDR allocation should not be substitute for critical reforms, be spent on priority areas within a medium-term plan, and follow good governance and transparency practices, it said.
The recent surge in prices of basic goods and services and rolling power cuts are testimony that all is not well at a time the economy was recovering from the effects of the Covid-19 pandemic.
There are fears the rise in prices will quicken inflation which had been brought under control in the past year but has been heading North.
As the IMF said this week, bold and decisive actions are required to lay the path for economic growth. Zimbabwe knows the solutions and has the toolbox to fix the challenges.
What is required is the political will. Should authorities reform for posterity or do the populism route to harvest some votes as we go towards elections in 2023?
The ball is in Zimbabwe’s court.
