THE International Monetary Fund (IMF) will visit Zimbabwe later this month to conduct its Article IV consultation mission as local players fear that the economy is heading towards a turbulent period.
IMF is set to also commence a Staff Monitored Programme this year as President Emmerson Mnangagwa’s government looks to shore up what it describes as its macroeconomic gains.
The announcement of the Article IV Consultation Mission was made at an IMF press briefing at the Bretton Woods institution’s headquarters in Washington DC, United States last Thursday.
“And then finally, on Zimbabwe. Our staff is expected to conduct the Article IV consultation mission later this month.
“Part of this — the Article IV consultation, will, of course, assess the entire economy, as we always do,” IMF communications department director Julie Kozack said, at the press briefing.
“But, we will also be looking at the new currency arrangement, the ZiG, and this Article IV consultation mission will give us the opportunity to do that.
“And just as background, Zimbabwe did introduce a new currency backed by a basket of foreign currencies and other assets, mainly gold.”
“And we, of course, stand ready to discuss these with the authorities and to support their efforts to restore macroeconomic stability.”
Local financial services firm, IH Securities in its latest report stated that Zimbabwe’s economy has been teetering owing to devastating drought, plummeting commodity prices, and harsh taxation laws.
In its May 2024 monthly report, IH Securities noted that the country’s economic growth was expected to slow down from 5,5% in 2023 to a paltry 3,5% in 2024.
The African Development Bank has suggested an even a lower figure of 2%.
“The outlook for the year has overall been gloomy owing to depressed activity in primary sectors and collapsing prices for key export commodities such as platinum and lithium, pointing to weaker bottom-of-the-pyramid liquidity,” IH Securities said.
“Economic growth for the country is therefore expected to slow down from 5,5% in 2023 to 3,5% in 2024 as per the government.
“In consideration of the magnitude of the drought and falling commodity prices, The African Development Bank has trimmed the economic growth forecast for 2024 from 3,6% to 2%.”
The report noted that the drought has also had a devastating impact on the country and is going to dominate financial reports for companies over the next quarter.
“Despite this, 1Q24 trading updates for the period ended 31 March have shown volume growth across the consumer staples and transport categories, whilst occupancies in the tourism sector picked up year on year,” it read.
“However, changes to taxation laws that came into effect on the 1st of January 2024 have exerted pressure on margins as well as competitiveness for select companies.
“In our view, the full impact of the El Nino drought might appear in the next round of trading updates owing to a lag impact.”
The El Nino drought has ravaged the agricultural sector, with summer food production dropping by 77%.
“The Ministry of Lands released the Second Round of the Crops, Livestock and Fisheries Assessment Report (CLAFA-2) consolidating the outcomes of the 2023/2024 summer season and addressing the severity of the El Nino drought, which has seen the driest summer in 40 years,” read the report.
“According to the report, summer food production fell 77% to 0,84 million MT with the steepest declines being recorded in groundnut and sweet potato production which are down 98% and 96%, respectively.
“Maize production collapsed 72% to 0.63mn MT, creating a deficit for both feed and food.”
The ministry has since reported that 9,2 million of the rural people will require food aid from June, 35% of the urban population will be food insecure, according to IH Securities.
“The government has said it will require US$3,3 billion in funding to enable effective safety nets until March 2025,” IH Securities said.
The report also revealed that housing and communication pricing in the local currency gained five basis points and six basis points, respectively, in the period relative to April.
According to the report, inflation rates are expected to remain low, achievable through strategically managed money supply growth.