THE IMF says policy interventions of the past few months by authorities in Zimbabwe are in the right direction and have helped stop the currency’s free-fall, even as the Washington-based lender keeps its growth forecast in 2022 at 3.5 percent.
‘The recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap,’ the Fund said on Monday after the conclusion of a week-long virtual staff visit in the country.
The economic growth forecast in 2022 at half the 7 percent recorded in 2021, is due to a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability, the IMF said. Zimbabwe’s treasury has a higher projection of 4.6 percent.
President Emmerson Mnangagwa has introduced a range of measures since May 7 to support the embattled Zimbabwe dollar, which was being sidelined by businesses and individuals in favour of the US currency. Those included a temporary ban on bank lending, introduction of an interbank rate at which most commerce can take place and the central bank hiking the key interest rates to 200 percent — currently the world’s highest.
The Fund said authorities in the near-term are faced with curbing inflationary pressures by further tightening monetary policy, as needed. Consumer prices in August rose 285 percent from a year earlier, while the Zimbabwean currency has depreciated more than 80 percent against the dollar — making it Africa’s worst performing currency in 2022.
The Fund recommended that authorities allow greater exchange rate flexibility through a more transparent and market-driven price discovery process, tackle foreign-exchange market distortions and eliminate exchange restrictions.
Zimbabwe isn’t eligible to receive any new lines of credit from the IMF as it remains saddled with ‘unsustainable debt.’ The country owed $13.2bn to various international financial institutions at the end of June, according to data from Treasury.