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IMF: Gloomy Zimbabwe Economic Situation to Remain in 2014

The International Monetary Fund (IMF) has painted a gloomy economic outlook for Zimbabwe this year, but has promised to place a resident representative in Harare to enhance interactions with the government.

In a press statement released at the end of an IMF delegation’s visit to Harare under Article Four Consultations, the lender of last resort says the macro-economic environment in Zimbabwe is expected to remain challenging in 2014, adding the continued moderate growth, is however, expected.

The IMF said full growth potential in Zimbabwe over the medium term depends on Harare pursuing strong macro-economic policies, including building up fiscal and external buffers.

The IMF also called on Harare to increase transparency in the mining and marketing of the country’s mineral wealth.

It also urged Harare to engage the country's creditors to find a solution to the nation’s long-standing debt arrears.

"In recent years Zimbabwe's economy expanded following more than a decade of decline that culminated in hyperinflation; but the rebound phase of its recovery is over. Growth decelerated in 2013, reflecting the impact of adverse weather conditions, weak prices for key exports, competitive pressures, low liquidity, and election-year uncertainty."

The IMF noted that real GDP in 2013 is estimated at just above 3 percent, sharply down from 10.5 percent in 2012. The 12-month inflation rate decelerated from 2.9 percent end-2012 to 0.3 percent at end-2013 (and further -0.5 percent in February 2014), reflecting weak domestic demand and the depreciating South African rand.

"The external account deficit widened in 2013, and reserves remain significantly below adequate levels. Fiscal policy in 2013 was challenged by election-related spending pressures and higher-than-budgeted employment costs.

"To mitigate these risks, it is important to strengthen fiscal policy, identify potential sources of domestic and foreign financing, and address financial sector vulnerabilities."

Finance Minister Patrick Chinamasa says Zimbabwe will miss targets set under the IMF’s Staff Monitored Programme (SMP). Harare is failing to meet key benchmarks such as reducing the government’s wage bill.

SMPs are an informal agreement between a country and IMF staff, where the latter agree to monitor the implementation of the authorities' economic program. SMPs do not entail financial assistance or endorsement by the IMF executive board.

Economist Godfrey Kanyenze of the Labour and Economic Development Research Institute said the economic situation is indeed worsening in Zimbabwe.

Meanwhile, senior officials in the Foreign Affairs Ministry say President Robert Mugabe will not attend the EU-Africa Summit after the bloc denied his wife, Grace, a visa to visit Brussels.

The summit, scheduled to take place between April 2 and April 3, is hanging in the balance as Africa threatens to boycott it over the EU’s decision to overlook some countries and invite Egypt, which is under African Union suspension.

Foreign Affairs Minister Simbarashe Mumbengegwi, according to some state officials, will make the formal announcement.

Apart from Zimbabwe’s protest over the visa, the EU and the African Union are also wrangling over Morocco and the exclusion of Sudanese leader Omar al-Bashir, the Saharawi Arab Democratic Republic and Eritrea.

EU ambassador to Zimbabwe, Aldo Dell’ Arricia, told Studio 7 that a high level delegation of Africans and the EU is meeting to find common ground.

He said more than 40 African leaders have confirmed participation in the summit, further isolating Zimbabwe.