Zimbabwe’s economy at crossroads – IMF

2014-11-08 09:37

Harare – Zimbabwe’s economy is showing no signs of recovery after adverse weather, low exports and election year uncertainty shattered growth prospects, the International Monetary Fund (IMF) has said.

The economy of the troubled southern African country “is at a crossroads,” the IMF said.

“The economic situation remains difficult,” it said laying out the path Zimbabwe could take towards recovery.

The global lender said the government needs strong macro-economic policies and debt relief along with a strategy to clear arrears in order to overcome its economic challenges.

It had indicated in September that Harare could not get fresh financial aid until it services its old debts.

Until two years ago, Zimbabwe’s economy had shown signs of recovery from a decade-long downturn which saw runaway annual inflation peaking at 231 million percent.

But that “post-hyperinflation rebound has ended,” the IMF said.

The economy registered 10.5% growth in 2012 after the government trashed the local currency which had been rendered worthless by hyperinflation only to decelerate to 4.5% growth in 2013, the fund said.

“The external position is precarious with low international reserves, a large current account deficit, an overvalued real exchange rate and growing external arrears,” the IMF said.

“Credit and deposit growth have slowed down sharply, liquidity conditions are tight and the banking system remains weak.”

Zimbabwe’s economy has been in a tailspin for more than a decade, only able to manage slow growth at best that has done little to reduce high unemployment.

Elections last year exacerbated the economic woes as the government was forced to borrow to fund the elections and businesses adopted a wait-and-see stance while foreign investors stayed away.

Despite election campaign promises to fix the economy, the government of veteran President Robert Mugabe appears out of sorts.

It had at the start of the year forecast 6.4% economic growth this year but later revised the figure downwards to 3.1%, citing depressed mineral output.

Fiscal pressures arose early this year following higher-than-budgeted wage increases and revenue shortfalls as the economy weakened.

The country owes domestic and foreign creditors $10 billion and a controversial law limiting foreign ownership enacted by Mugabe in 2007 has spooked international investors.

The 90-year-old president has argued that the law forcing foreigners to hand over majority stakes in companies empowers black Zimbabweans who were disadvantaged by discriminatory colonial laws.

But critics complain that the law and the frequent amendments to it have been a key factor in hobbling the country’s once vibrant economy.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.