The International Monetary Fund says the Zimbabwean economy grew by 9 percent in 2010 but the outlook for 2011 is uncertain due to the country’s fast-track indigenization program, insufficient credit and lack of accountability in the diamond sector.
In a statement, the IMF team which completed its latest Article IV economic consultation mission in the country last Thursday, said real gross domestic product grew by an estimated 6 percent in 2009 and 9 percent last year.
Despite this, it said Zimbabwe’s budget is still heavily tilted towards the public wage bill with insufficient funds for social programs and high-priority infrastructure.
“As a result, growth benefits did not fully trickle down to many ordinary Zimbabweans outside the public sector and the growing segments of the formal private sector, and poverty remains widespread,” said the IMF.
The IMF said Zimbabwe must weed out "ghost workers" who continue to drain funds at a time when the country's resources are still very limited. The mission cited an "inefficient" mix of public spending, sector vulnerabilities, and business climate weaknesses.
An uncertain macroeconomic outlook for 2011 will be exacerbated by a large projected fiscal gap and “the recently announced fast-track indigenization of the mining sector that will weigh heavily on growth and poverty reduction prospects." Under the indigenization program, the government proposes to take a controlling 51 percent stake in firms in the important mining sector through sovereign wealth funds and other vehicles.
The IMF said significant wage cost overruns and a large outstanding domestic payments arrears as of the end of 2010 were the main sources of fiscal pressures.
“The fiscal gap could be eliminated through the removal of ghost workers from the payroll, reinforced controls on employment levels, and a reduction in low-priority transfers to state enterprises,” it said. It said it will be “critically important to protect non-wage social and infrastructure expenditure which is essential for sustainable growth.”
The IMF said the board of the Reserve Bank of Zimbabwe has achieved a significant improvement in central bank governance, reporting and organizational restructuring. But it further steps are needed to accelerate restructuring of the distressed RBZ.
It ruled out new credit lines to Zimbabwe saying that the country remains in debt distress worsened by recent non-concessional borrowing by the government.
“A significant strengthening in policies and debt relief within a comprehensive arrears clearance framework supported by donors are essential for resolving Zimbabwe’s external payment arrears," the IMF mission statement said.
Economic commentator Rejoice Ngwenya said Harare should take action on no-show public workers, indigenization and other headwinds to economic growth.