Tawanda Karombo
The International Monetary Fund (IMF) has delivered a cautiously optimistic assessment of Zimbabwe’s economy, suggesting that it was stabilising despite ongoing policy and monetary challenges that have historically plagued the nation.
South Africa’s northern neighbor has long struggled for stability, with consumers and companies hard done by policy inconsistency that has distorted pricing.
South African companies in Zimbabwe include platinum group metals producers Impala Platinum and Sibanye-Stillwater, Pick ‘n Pay and Old Mutual, among others.
The IMF this week said Zimbabwe was now “experiencing a degree of macroeconomic stability despite lingering policy challenges” after emerging out of “successive bouts of hyperinflation” over the past few years.
Zimbabwe yearns to return to a single local currency regime by 2030 and the IMF has been supportive of the Zimbabwe Gold (ZiG) local unit of exchange, saying a tight monetary policy has helped to stabilize the local currency and reduce inflation.
“Growth this year is recovering following a sharp slowdown in 2024. During the first half of 2025, better climate conditions and historically high gold prices have boosted agricultural and mining activity, strengthening the current account and contributing to the recovery, with growth projected at 6% in 2025,” said Wojciech Maliszewski, who led an IMF mission to Zimbabwe this month.
However, critics of President Emerson Mnangagwa’s administration say economic conditions on the ground paint a picture far from stability.
Global macro-economist Kevin Carey described the evaluation of Zimbabwe’s economy by the IMF as a “detailed readout of a situation where there is underlying growth and some policy reforms, but fiscal dominance remains, in turn affecting the ZiG” currency.
With the economy dollarising at a faster pace, the IMF advised that Mnangagwa’s administration should shore up the local currency through “measures to enhance the demand for ZiG in the domestic economy” and reduce “any uncertainty weighing on financial” intermediation.
Even then, the Reserve Bank of Zimbabwe (RBZ) this week maintained the monetary policy rate at 35%. Other critics argue that the central bank is restricting money supply to contain inflation.
The IMF also noted that fiscal pressures intensified in 2024 and in the first months of 2025 as higher revenues proved insufficient to meet growing spending needs from higher public sector wages, capital outlays, debt servicing costs and servicing liabilities related to the acquisition of assets for the Mutapa Investment Fund.
“The fiscal deficit was financed by T-bills issuance and direct borrowing from the RBZ’s overdraft facility to service debt, contributing to the expansion of domestic liquidity and an overnight drop in the value of the ZiG in September 2024, and a significant buildup of expenditure arrears that continued into 2025,” noted the IMF.
The IMF has now recommended that Zimbabwe improve the foreign currency willing buyer, willing seller market through a more transparent price-setting mechanism and by gradually replacing surrender requirements with a requirement to convert export proceeds directly into the market.
Exporters in Zimbabwe are required to give up a portion of their earnings in hard currency in return for the local currency equivalent.
Regarding Zimbabwe’s plan to transition to a single currency from the currency multiple currency system in which US dollars, South African rand and other regional and global currencies are legal tender, the IMF emphasized the need to continue strengthening the monetary and foreign exchange market framework, complemented by efforts to reduce uncertainty weighing on financial intermediation.
It said the Zimbabwe government “should provide more clarity on the operational implications of the transition plan, including clarifying that the use of a mono-currency will be limited to domestic transactions, allowing for bank deposits to remain denominated” in both currencies” currently in use.
“There must be confidence in the local currency and it must be seen to hold value otherwise the economy will continue to shun it,” a local bank manager told Business Report on Thursday.
“The government must walk the talk and show that they have contained expenditure and are dealing with corruption which erodes confidence.”
BUSINESS REPORT
