This photo taken on Feb. 8, 2022, shows makeshift markets in Mbare, south of downtown Harare, Zimbabwe. (Xinhua/Tafara Mugwara)
The International Monetary Fund has projected Zimbabwe's economy to grow by 3.5 percent in 2022, down from 6.3 percent recorded in 2021.
HARARE, March 25 (Xinhua) -- The International Monetary Fund (IMF) has projected Zimbabwe's economy to grow by 3.5 percent in 2022, from 6.3 percent recorded in 2021.
"The output recovery that resumed in 2021 is expected to continue, albeit at a slower pace, with growth projected at about 3.5 percent in 2022 and 3 percent over the medium term in line with Zimbabwe's growth potential," the IMF said in a statement released Thursday following the conclusion of the Article IV consultation with Zimbabwe.
The Zimbabwean government's swift response to the COVID-19 pandemic through containment measures, economic and social support had helped to contain the adverse impact of a two-year recession in 2019 and 2020 during which real GDP contracted cumulatively by 11.7 percent, the IMF said.
The IMF, however, said despite some positive signs of economic recovery since last year, high double-digit inflation and wide parallel foreign exchange market premia have persisted, with poverty rising and about a third of the population at risk of food insecurity.
The effects from the COVID-19 pandemic and protracted drought had compounded existing structural constraints and would lead to scarring on the economic outlook, it said.
Batsirai Tsombori, a second-hand clothes vendor, speaks to a woman at his roadside market in Mbare, Harare, Zimbabwe, Feb. 8, 2022. (Xinhua/Tafara Mugwara)
The IMF welcomed the positive signs of economic recovery following two years of deep recession and commended the Zimbabwean authorities for their swift response to the COVID-19 pandemic and for stronger efforts to address macroeconomic imbalances while prioritizing social support.
Noting that substantial challenges remain, including extreme poverty and longstanding structural constraints, the IMF urged the Zimbabwean authorities to implement the necessary reforms that would foster higher, more inclusive growth and pave the way for re-engagement with the international community.
The Bretton Woods institution urged Zimbabwe to enhance revenue mobilization, limit fiscal risks and use the 961 million U.S. dollars SDR allocation prudently and transparently to sustain economic recovery.
It noted that Zimbabwe remains in debt distress, with large external arrears to official creditors, and welcomed Zimbabwe's commitment to re-engage with external creditors, including by resuming token payments and preparing a debt resolution strategy.
"Directors recommended further monetary tightening, given the persistently high inflation. In this context, they emphasized the need to increase the operational independence of the central bank, discontinue its quasi-fiscal operations, and improve its coordination with the fiscal authorities," it said.
Concerted efforts were also needed toward greater exchange rate flexibility by allowing a more transparent and market-driven price process, it said.
"Directors called on the Zimbabwean authorities to phase out exchange restrictions and multiple currency practices as soon as conditions permit," the IMF said.
The IMF welcomed the removal of Zimbabwe from the FATF grey list and progress on strengthening the AML/CFT framework and encouraged further efforts to address the remaining deficiencies.
Zimbabwe was this month removed from the Financial Action Task Force (FATF) grey list following an on-site evaluation exercise carried out in January this year.
It had been placed on the FATF grey list in 2019, following a mutual evaluation (assessment) process that identified a number of deficiencies in the country's implementation of the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Standards. ■
