The International Monetary Fund (IMF) says Zimbabwe’s economy grew 6.3% in 2021, recovering from an 11.7% contraction between 2019 and 2020, but the Fund warns the country needs reforms to support growth and stem growing poverty.

Last year, the IMF forecast GDP growth of 5.1%, but the Fund said on Thursday the recovery had been faster than expected. The IMF growth figure for 2021 is lower than the government’s estimate of 7.8% growth for 2021.

“Real GDP grew by 6.3% in 2021, reflecting a bumper maize harvest, a strong recovery in mining, and buoyant construction,” the IMF’s executive board said in a statement after its latest routine Article IV consultation with Zimbabwe.

But inflation, fueled by the country’s weak currency, remains a threat, while poverty is on the rise.

“However, high double-digit inflation and wide parallel foreign exchange market premia have persisted. Poverty has risen and about a third of the population is at risk of food insecurity,” the IMF reports.

The recovery in production that resumed in 2021 is expected to continue, according to the IMF, but it will be slower. The IMF sees only sluggish growth of 3.5% in 2022 and 3% in the medium term.

The country’s handling of COVID-19 has mitigated the pandemic’s impact on the economy, he said.

“The rapid response of the authorities to the pandemic, in particular through containment measures and economic and social support, has helped to contain its harmful effects. Pandemic-related spending, equivalent to 2% of GDP, in 2020 was funded through reallocation within the budget. In 2021, these expenditures represented about 1.6% of GDP, partially financed by the allocation of SDRs,” the IMF said.

IMF: the economy needs to be reformed

But there is a reality check for the government of the Fund.

While “there are positive signs of economic recovery after two years of deep recession”, according to the IMF, what the country needs are economic and political reforms.

“International re-engagement has lagged as stakeholders seek political and economic reform,” the report said.

The economic decline from 2019 was due to “exogenous shocks”, but also to the “political missteps” of the Zimbabwean government.

“The 2019 staff-monitored program experienced significant political slippage and passed without review. Since then, the authorities have made significant progress towards restoring macroeconomic stability, although the implementation of previous IMF policy advice has been mixed.

The IMF urges a more independent central bank, better coordination between the RBZ and the government, a “more transparent and market-oriented” exchange rate, and an end to foreign exchange restrictions and multiple currency practices “as soon as conditions permit.”

The IMF is also urging the Zimbabwean government to increase tax revenue by “broadening the tax base and improving tax administration and compliance”.

Source: NewzWire

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