Africa Economy: Zimbabwe economic outlook remains difficult: IMF

The International Monetary Fund (IMF) said Monday Zimbabwe's economic outlook remains difficult with growth likely to weaken further in 2015.

Speaking at the conclusion of its two-week mission to conduct the first review of the country's successor Staff Monitored Program (SMP), IMF assistant director and head of mission Domenico Fanizza said Zimbabwean authorities needed to step up efforts to lay a foundation for lasting and stronger economic growth.

"The economic outlook remains difficult. The external position is precarious and the country is in debt distress. Growth has slowed down and it is likely to weaken further in 2015," Fanizza said.

Zimbabwe has projected an economic growth of 3.1 percent in 2015, down from an average of 9 percent four years ago.

Fanizza said Zimbabwe needs to quickly come up with a mechanism to clear its 7 billion U.S. dollars debt with multilateral creditors, among them the World Bank which it owes 1 billion dollars as well as developing a road map for debt rescheduling under the Paris Club.

While Zimbabwe had made remarkable progress in implementing economic reforms under the 15-month successor SMP, Fanizza said further reforms were still required to re-position the economy on a growth path.

The successor SMP runs from October 2014 to December 2015, and follows another one-year SMP which expired in June 2014.

Under the successor SMP, Zimbabwe has committed itself to undertaking fiscal policy reforms by eliminating primary fiscal deficits, reducing government's wage bill currently gobbling 80 percent of state revenue and restoring confidence in the financial sector by clearing non performing loans.

Other targets include improving the investment climate by further clarifying the indigenization law which requires foreign investors to sell majority shareholding to locals and development of a strategy to clear the country's external debt with multilateral creditors.

Finance Minister Patrick Chinamasa said Zimbabwe was committed to normalizing relations with multilateral creditors and would strive to implement extensive economic reforms to revamp economic growth.

These would include making a commitment to compensate white commercial farmers who lost their land during the country's land reform program.

"By this time next year we should be entering a new phase of clearing our arrears with multilateral creditors and opening floodgates of new development financing to stimulate economic growth and reduce poverty in the country," the minister said.

Zimbabwe has not been receiving any loans from the Bretton Woods institutions since 2000 when it started accumulating arrears.

While acknowledging that government currently did not have money to compensate former white commercial farmers, Chinamasa said it was important for the Zimbabwe government to commit itself to compensating the farmers to help restore investor confidence in the country.

He said government will also modify its labor laws to ensure labor market flexibility, as well reduce its wage bill to free up more resources for infrastructure development.

"We will forge ahead with policy measures that restore confidence, increase productivity, normalize relations with our creditors and strengthen our financial system," he said.

The second IMF review of the successor SMP will be carried out in September. Endi