IMF says it will not provide loans for Zimbabwe

The International Monetary Fund has ruled out providing financial assistance to Zimbabwe, following a staff mission to the country.

The mission’s leader, Dhaneshwar Ghura, said the IMF was “precluded from providing financial support to Zimbabwe due to unsustainable debt and official external arrears”. The IMF urged the Reserve Bank of Zimbabwe (RBZ) to continue raising rates and to liberalise the foreign-exchange market.

In a September 19 statement, Ghura called on Zimbabwean authorities to shut down “the RBZ’s quasi-fiscal operations”, which “should be transferred to the budget”. In a March 2022 Article IV report, the IMF said these activities included lending to state-owned enterprises and subsidies to gold-mining companies and exporters.

The IMF endorsed the central bank’s tightening of monetary policy. The RBZ has increased its policy rate from 35% in early 2021 to 200% now, including a 12,000-basis point hike in June.

Nevertheless, inflation has continued climbing, with the official figure reaching 285% last month. Steve Hanke, an economist at Johns Hopkins University, said the actual figure was likely to be close to 600%.

In May, Zimbabwe’s president, Emmerson Mnangagwa, set a 0% target for reserve money growth and froze bank lending for 10 days. The country’s currency has also depreciated steadily. On the informal market, the Zimbabwe dollar now trades at around $Z815 to $1, down from $Z175: $1 last November.

A report published in local media said Zimbabwe dollar cash had run short, forcing banks to cap disbursements. The head of the bankers’ association said the informal market was hoarding cash, while another source in the piece traced the shortage to RBZ policies to reduce liquidity.

According to the March 2022 report, Zimbabwe’s external debt totalled more than 106% of GDP, and the majority of this was in arrears.

The IMF projected that the Zimbabwean economy would contract by 3.5% this year, due to “a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability”.