The International Monetary Fund (IMF) recently released the conclusion of its 2020 Article IV Consultation with Zimbabwe, stating the country’s economic reform agenda was off-track.
According to the report, Zimbabwe is currently struggling with its worst economic crisis in a decade, with prices of basic goods soaring, shortages of medicine and fuel, crippled agriculture, lack of electricity, the newly introduced Zimbabwean dollar (ZWL$) losing most of its value, high inflation rate, and low international reserves amongst others.
IMF’s statement highlighted the fact that “the government which came to office following the 2018 elections adopted an agenda focused on macro stabilization and reforms.” These reforms entailed a complex framework for proposed monetary and fiscal policies, economic laws and regulations which when established will reduce volatility and encourage welfare-enhancing economic growth. However, the statement revealed that these plans are “now off-track as policy implementation has been mixed.”
Despite daily power cuts lasting up to 18 hours in Zimbabwe, the state power transmission company said on Thursday, February 27, 2020, that it would increase its electricity tariff by 19.02 percent. This new policy will be effective from March 1 although the last tariff increase was done less than 5 months in October by 320 percent. The government citing a rise in inflation and a weakening exchange rate said that this would help increase supplies in the southern African nation.
Similarly, delays and missteps in the foreign exchange and monetary reforms have failed to restore confidence in Zimbabwe’s new currency and the government’s re-engagement internationally on debt arrears is still delayed, constraining its access to external support.
Without an increase in donor support, the IMF said, Zimbabwe had a high risk of a humanitarian crisis, with more than half of the population without food security, another poor harvest expected and growth in 2020 is projected at near-zero with no signs to end food shortages. The UN World Food Programme (WFP) already warned in December 2019 that food supplies will run out in early 2020 unless urgent assistance is provided.
However, with these economic and humanitarian crises overwhelming the citizens of Zimbabwe, the Executive Directors of IMF dished out a series of advice to aid the country’s government. One of which is to make a concerted effort to ensure economic and social stability through the adoption of coordinated fiscal, monetary and foreign exchange policies, alongside efforts to address food insecurity and serious governance challenges. Also, the IMF emphasized the importance of re-engagement with the international community to support efforts to achieve economic sustainability and address the humanitarian crisis.