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Financial sector remains vulnerable

Zimbabwe’s economic outlook is for continued sluggish growth with risks of further deceleration, amid persistent low confidence, liquidity shortages, a weak financial sector and subdued exports, the IMF also said.

“The economic rebound experienced since 2009 has dwindled. After averaging 10% over 2009-12, economic growth decelerated to 3% in 2013, reflecting adverse weather conditions, election year uncertainty, weak demand for key exports, and tight liquidity conditions,” said the IMF.

“Inflation continued its downward trend (0.2 %t in May, year on year), mainly reflecting the appreciation of the US dollar against the South African rand. Pressures on the fiscal position have continued in 2014, with revenues underperforming during the first four months, against the background of the economic slowdown and weak demand.”

The fund said the Zimbabwean government has identified revenue and expenditure measures to fill the fiscal gap that has emerged in 2014 to offset macroeconomic pressures.

“The financial sector remains vulnerable from high levels of non-performing loans, low capitalisation and tight liquidity conditions—albeit with wide differentiations across banks (and) the external position remains precarious with large current account deficits and low international reserves.”

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