IMF impressed by Zim’s tight monetary policy

By Stanley James, Business Editor

The International Monetary Fund (IMF) has been impressed by Zimbabwe’s tight monetary policy stance, saying it will be key to achieving the projected 3.5% growth rate by the end of the year.

Central bank authorities have in recent months tightened the monetary policy with interest rates being adjusted upwards to 200%.

While the move has been criticised by some sections, an International Monetary Fund team led by Mr Dhaneshwar Ghura has hailed the move as a positive step.

The IMF team, which completed its two-week mission in Zimbabwe this Monday, revealed in its report that the tight monetary policy stance has narrowed the gap between the official and parallel market exchange rates.

Official Treasury data reveals that the tight monetary policy stance is also yielding results as in the recent few weeks there has been a rapid correction in the market with the interbank and parallel rates converging.

The exchange rates have been hovering between ZW$605 and ZW$660 per one United States dollar.

The team stated that while Zimbabwe is taking the right direction in terms of economic reforms, more still needs to be pursued on the monetary and fiscal side to sustain current gains.

The growth in the mining and agriculture sectors has also been cited as key to the recovery trajectory while more attention should be given to poverty alleviation.

The IMF maintained its economic growth forecast for this year at 3,5% after recovering by seven percent last year.

The Bretton Woods institution has also called on government to guard against uncertainties, climate change shocks and geopolitical tensions.

Zimbabwe is expecting the economy to register a 4.5% growth this year from the previous forecast of 5.5%.

The country cannot access loans from the IMF as government forges ahead in repaying all debts owed to external creditors to access fresh loans. 

Recommendations from the report include sustainable methods of raising taxes, containing budget deficits, tackling foreign exchange market distortions and eliminating exchange restrictions.