IMF Urges Acceleration of Currency Reforms in Zimbabwe

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Zimbabwe received advice from the International Monetary Fund (IMF) on Wednesday to expedite currency reforms during the conclusion of a staff visit. The IMF emphasized the importance for authorities to transition towards a market-driven exchange rate and eliminate current distortions in place.

The discussions during the visit revolved around Zimbabwe’s request for an IMF staff-monitored program. This initiative forms part of the southern African country’s endeavors to re-engage with the international financial community by showcasing a consistent record of sound economic policies.

Zimbabwe has struggled to secure financing from entities like the IMF for over two decades due to outstanding debts to lenders such as the World Bank, the African Development Bank, and the European Investment Bank.

The IMF, in a statement, highlighted Zimbabwe’s unsustainable debt situation and official external arrears as barriers to providing financial support to the country.

To qualify for an IMF financial arrangement, Zimbabwe needs a clear roadmap for comprehensively restructuring its external debt, including clearing arrears, and implementing a reform plan aligned with restoring macroeconomic stability.

Zimbabwe’s central bank and finance ministry have disclosed efforts to stabilize the Zimbabwean dollar, which has depreciated approximately 40% against the U.S. dollar since the year began. One proposed measure involves pegging the exchange rate to assets like gold.

The IMF recommended policymakers to remove restrictions on the 10% allowable trading margin for domestic transactions and narrow the central bank’s legal mandate to core functions.

During a joint press conference with the IMF, Zimbabwe’s Finance Minister Mthuli Ncube acknowledged the consensus that the local currency should better reflect market conditions.

The Zimbabwean dollar was reintroduced in 2019 after a decade of dollarization but experienced rapid devaluation, prompting the reauthorization of foreign currencies for domestic transactions shortly after.

Central bank Governor John Mangudya highlighted that an upcoming monetary policy statement would focus on stabilizing the exchange rate.