International Monetary Fund (IMF) country director for Zimbabwe, Patrick Amir Imam says efforts to stabilise the local currency and contain an inflationary rage should be underpinned by a broader reform and stabilisation agenda.
His comments came as annual inflation continued to decline after reaching 838% in July 2020, its highest level since 2008.
The rate was estimated at 194% last month.
“The authorities’ efforts to stabilise the local currency and lower inflation over the last few months should be underpinned by a broader reform and stabilisation agenda,” Imam said, in responses emailed to businessdigest this week.
“Addressing pandemic-related health and social challenges and food insecurity would require determined efforts in expenditure re-prioritisation, revenue mobilisation and dialogue with the international community on humanitarian support. The near-term macroeconomic imperative is coordinated fiscal, foreign exchange and monetary policies to continue to stabilise the economy, while addressing Covid-related challenges and food insecurity. Fund (IMF) staff takes note of the authorities’ efforts to stabilise the local currency and lower inflation over the last few months,” he said.
The growing high informality and poverty rates are being caused by a significant rise in the cost of living driven by the hikes in rentals, schools fees, healthcare costs, tariffs for public services and food.
In its May 2021 food security report, the Food and Agriculture Organisation, a United Nations agency, said more than four-fifths of surveyed households reported a decrease in income, with nearly half of them reporting a drastic decrease.
The main shocks reported by more than half of surveyed households were price increases and Covid-19 restrictions.
Consumer spending has fallen and continues to do so, another indication that the economy may remain in the doldrums.
“Structural reforms aimed at improving the business climate and reducing governance and corruption vulnerabilities are essential for ensuring sustained and inclusive growth,” Imam said.
Last week, the Confederation of Zimbabwe Retailers (CZR) called for a pro-poor fiscal policy with significant allocation of resources to basic social and economic sectors that directly reach the poor.
The CZR said 83% of urban households are now struggling to buy basics.
Imam’s comments come after IMF Communications director, Gerry Rice said the IMF had planned for a virtual staff mission to Zimbabwe during the first half of the year.
“We are very cognisant that the economic social situation in Zimbabwe has deteriorated sharply. Again, Zimbabwe, like virtually all other countries, has been hit by Covid-19,” Rice said.
“In mid-March Zimbabwe’s Finance minister announced that an IMF staff mission is expected in the second quarter of this year, followed by what he hoped would be the commencement of a new staff monitored programme in the third quarter of this year. The Fund continues to provide policy advice and capacity development to Zimbabwe. We are precluded from providing financial support at this point, due to an unsustainable debt and official external arrears situation. However, again, IMF staff continues to actively engage with the Zimbabwean authorities, including through our policy dialogue, data updates and provision of capacity development,”Rice added.