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IMF urges Zimbabwe to adopt comprehensive policy package to revive economy

Xinhua, April 24, 2017 Adjust font size:

The International Monetary Fund (IMF) has urged Zimbabwe to adopt a comprehensive policy package to extricate itself out of severe economic challenges it is facing that include a biting shortage of bank notes.

The Bretton Woods Institution said on Sunday that Zimbabwe will not solve its economic challenges using a currency solution alone but needs a holistic package of reforms to address the fiscal challenges.

IMF African Department director Abede Aemro Selassie told journalists in Washington that the bond notes alone would not help Zimbabwe address its economic challenges.

"Zimbabwe is in a very, very difficult situation, as you know. There's a limited amount of foreign exchange inflows coming in and no monetary policy tool. So, they are in a difficult circumstance right now. We think that going down this one note route, in and of itself, will not address the challenges that the country has," Selassie said.

Zimbabwe last November introduced bond notes that are backed by a 200 million African Export-Import Bank (Afreximbank) facility as a means to ease cash shortages hitting the economy since early 2016.

Since November, the central bank has put 130 million worth of bond notes into circulation. The central bank pegged the notes at par with the U.S. dollar but they are trading at a slightly lower rate against the green back on the black market.

Despite the introduction of the notes, Zimbabwe continues to face cash shortages.

Selassie said it was very important for Zimbabwe to implement structural reforms and have a more comprehensive policy package that addresses fiscal challenges it faces.

"So, it's again more of a holistic package of reforms that are required to get Zimbabwe out of the place it's in right now," he said.

Zimbabwe is facing severe economic challenges characterized by acute cash shortages, low foreign direct investment and low exports.

Despite the challenges, the Zimbabwe government is expecting growth to pick up to 3.7 percent in 2017 from 1.7 percent last year spurred by substantial growth in the agricultural sector, the backbone of the country's economy. Endit