THE International Monetary Fund (IMF) says its supervised economic reform plan on Zimbabwe, the Staff Monitored Programme (SMP), will begin once the country has taken “decisive steps” to address policy issues, dealing a major blow to re-engagement efforts.
Zimbabwe is banking on an SMP as baby steps to reforms under the structured dialogue programme as it moves to normalise relations with bilateral and multilateral creditors.
In a report after the conclusion of the Article IV consultation on Zimbabwe, IMF outlined a to-do list for Zimbabwe. The IMF team was led by its mission chief to Zimbabwe, Wojciech Maliszewski.
“In the context of the requested SMP, IMF staff stands ready to resume discussions in due course once decisive steps have been taken by authorities to address the key policy issues highlighted by the mission,” Maliszewski said.
He said Zimbabwe plans to transition to a mono-currency system by 2030, to which the mission emphasised the need to continue strengthening the monetary and forex framework in line with IMF staff recommendations.
“This should be complemented by measures to enhance the demand for ZiG in the domestic economy—most notably, increasing the share of Treasury’s operations [revenues and expenditures] in ZiG.”
Maliszewski said the authorities should provide more clarity on the operational implications of the transition plan to reduce any uncertainty weighing on financial intermediation.
This includes clarifying that the use of a mono-currency will be limited to domestic transactions, allowing for bank deposits to remain denominated in both currencies, he said.
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He revealed that policy priorities that the IMF wanted to see include closing a substantial fiscal financing gap for 2025 in a way consistent with available sustainable and non-inflationary financing.
“The mission recommends improving the functioning of the WBWS [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 through authorised dealers, while focusing the RBZ’s FX interventions to managing excessive volatility in the exchange rate,” Maliszewski said.
“Monetary policy can be enhanced by the introduction of an effective deposit facility at the RBZ, followed by fully introducing indirect market instruments and phasing out direct instruments.
“In the longer term, a comprehensive package of macroeconomic, financial, and structural policies should be pursued to allow for a gradual relaxation of other Capital Flow Management Measures and elimination of undesirable exchange restrictions noted by the Article VIII mission.”
He said to mitigate fiscal risks, the mission also recommended strengthening the governance framework for the Mutapa Investment Fund, including strengthening its reporting, audit, disclosure and oversight requirements in line with international best practices.
Maliszewski said international re-engagement remains critical for debt resolution and arrears clearance, which would open the door for access to external financing.
“In this context, the authorities’ re-engagement efforts, through the Structured Dialogue Platform, are key for attaining debt sustainability and gaining access to concessional external financing.”
