The International Monetary Fund (IMF) says Zimbabwe’s economy grew 6.3% in 2021 on the back of a bumper maize harvest, strong performance in mining, and buoyant construction.
Last year, the IMF had projected GDP growth at 5.1%, but on Thursday the Fund said that recovery had been faster than expected.
Zimbabwe’s economy contracted by 11.7 per cent between 2019 and 2020 due to Cyclone Idai, drought, and the COVID-19 pandemic as well policy missteps in 2019, according to the IMF.
In a statement after its latest routine Article IV consultation with Zimbabwe, the IMF executive board said:
Real GDP rose by 6.3% in 2021 reflecting a bumper maize harvest, strong pickup in mining, and buoyant construction.
A tighter policy stance since mid-2020 (relative to 2019) has contributed to lowering inflation to 60.7 per cent (y/y) at the end-2021.
Fiscal policy was tightened in 2020‑21, reflecting increased revenues and lowered spending.
The current account balance turned into a surplus during 2019-21, reflecting favourable metal prices, lower imports, and a surge in remittances.
The IMF however, noted that inflation has remained in double digits and wide parallel foreign exchange market premia have continued.
The fund also observed that poverty has risen and about a third of the population is at risk of food insecurity.
Zimbabwe’s economic recovery is expected to continue in 2022, with growth projected at about 3.5 per cent and 3 per cent over the medium term.
The IMF commended Zimbabwe for its response to the COVID-19 pandemic when it first emerged in 2019, saying this helped to reduce the impact of the pandemic. The IMF said:
The authorities’ swift response to the pandemic, including through containment measures and economic and social support, helped contain its adverse impact.
Recommendations by the IMF to Zimbabwean authorities
- implement the necessary reforms that would foster higher, more inclusive growth and pave the way for reengagement with the international community.
- enhance revenue mobilization, including broadening the tax base and improving tax administration and compliance.
- accelerating reforms of state-owned enterprises and enhancing fiscal controls will be critical to limit fiscal risks.
- use the SDR allocation prudently and transparently.
- enhance debt management and transparency.
- increase the operational independence of the central bank, discontinue its quasi-fiscal operations, and improve its coordination with the fiscal authorities
- prioritise structural reforms to improve the business climate and build resilience to climate change.