The International Monetary Fund said on Tuesday it was unable to provide financial support to Zimbabwe due to its unsustainable debt and external arrears, and any lending arrangement would require a clear path to a restructuring of its external debt.
The IMF said its staff completed a virtual mission to Zimbabwe from Oct. 16 to Nov. 16, and noted "significant" efforts by authorities there to stem inflation, contain budget deficits and reserve money growth.
Zimbabwe, which has suffered from bouts of hyperinflation in the last 15 years, has not received funding from lenders like the IMF and World bank for more than two decades due to arrears.
Its external debt is more than $10 billion and most of it is in arrears.
"A Fund financial arrangement would require a clear path to comprehensive restructuring of Zimbabwe's external debt, including the clearance of arrears and obtaining financing assurances from creditors," the IMF said.
Creditors owed by Zimbabwe include the World Bank, African Development Bank, European Investment Bank and the Paris Club. The national treasury says it is working on a plan to clear the arrears.
The IMF reiterated that Zimbabwe's economy would grow by 6% this year but added that uncertainty remained high due to the effects of COVID-19 and the economy's vulnerabilities to climatic shocks like drought and cyclones.
"Decisive actions are needed to lock in economic stabilisation gains and accelerate reforms," the IMF said.
The Fund called for greater official exchange rate flexibility, removal of foreign currency market distortions and containment of fiscal deficits.