A mission of the International Monetary Fund (IMF) led by Vitaliy Kramarenko visited Zimbabwe during March 3-17, 2010 to conduct the 2010 Article IV consultation discussions. At the conclusion of the mission, Mr. Kramarenko, mission chief for Zimbabwe, issued the following statement in Harare:
“In 2009, following a decade of economic decline and hyperinflation during 2007–08, policies improved significantly. The multi-currency system adopted in early 2009 helped restore price stability, restart financial intermediation, and impose fiscal discipline by precluding the option of budget deficit monetization. Budget revenue increased significantly, which helped finance improved delivery of public services, while the fiscal position was broadly balanced. Price and exchange system liberalization improved allocation of resources and availability of goods in the domestic markets. In response to better policies, short-term capital inflows and FDI increased in 2009. All these positive steps have supported a nascent economic recovery.
“However, the economic recovery remains fragile and domestic and external imbalances are building up; therefore, significant policy challenges need to be addressed without delay. Regarding fiscal policy, the government needs to ensure that sufficient budgetary allocations are made to critically important infrastructure rehabilitation projects and social programs supporting vulnerable groups while maintaining a fiscal stance consistent with macroeconomic stability. To this end, budgetary expenditures need to be better prioritized and the central government wage bill needs to be reduced as a share of revenues, including through the elimination of ghost workers based on the results of the on-going payroll audit. The multi-currency system, which the authorities have decided to maintain until 2012, will provide a strong nominal anchor. Risks to the banking system are rising significantly and should be mitigated by stepping up prudential measures. In addition, RBZ governance needs to be strengthened, including through appointment of a Reserve Bank of Zimbabwe (RBZ) governing Board composed of reputable members and approval of an RBZ operating budget envisaging a significant downsizing and refocusing on core activities under the multi-currency system. In the area of structural reforms, the business climate, particularly respect for property rights, needs to be strengthened and the flexibility of labor markets, including with regard to wage levels, needs to be increased to improve Zimbabwe’s competitiveness and attractiveness to domestic and foreign investors.
“Zimbabwe remains heavily dependent on humanitarian assistance to meet basic needs of its population. Continuing efforts to strengthen relations with the international community and attracting increased donor assistance, in particular in the areas of health, education, and critical infrastructure, would help improve the living conditions of ordinary Zimbabweans.
“IMF staff will continue to maintain a close policy dialogue and provide targeted technical assistance in the context of regular visits. Access to IMF lending resources would be subject to relevant IMF policies, including a track record of sound economic policies and a comprehensive strategy for the clearance of arrears to official creditors agreed among the government coalition partners and with official creditors.”