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Economic situation in Zimbabwe needs structural changes
December 6, 2017, 5:34 pm

High government spending, an untenable foreign exchange regime and inadequate reforms are threatening economic growth in Zimbabwe, the International Monetary Fund (IMF) warned.

The country needs to act urgently to reduce its deficit to a sustainable level, accelerate structural reforms and re-engage with the international community to access much needed financial support, said the IMF. Zimbabwe has not been able to borrow from international lenders since 1999 when it started defaulting on its debt and has $1.75 billion rand in foreign arrears.

Once one of Africa’s most promising economies, Zimbabwe has suffered decades of decline as the ruling ZANU-PF Party, under former President Robert Mugabe, pursued policies that exasperated many Western governments. Among Mr. Mugabe more controversial policies since coming to power in 1980 has been the seizure of white-owned commercial farms. Until then, the minority white Zimbabwean population of around 0.6 percent of the population held over 70 percent of the country's most fertile agricultural land. International sanctions and external credit freezes led to a sharp decline in agricultural exports, the country’s economic mainstay. Mismanagement and corruption at the highest level further propelled the economy’s downward spiral of the economy. Inflation rose to hyperinflations levels in 2008 — from an annual rate of 32 percent in 1998, to an official estimated high of 11,200,000 percent — prompting the government to suspend the Zimbabwean Dollar in 2009.

After nearly four decades in power, Mr. Mugabe, 93, was last week forced to resign following pressure from the military, the ruling ZANU-PF party and sections of the general populace. Former Vice-president Emmerson Mnangagwa, whose dismissal by Mr. Mugabe led to the standoff with the army, has been reinstated by the ZANU-PF, and sworn in as the country's new President.

President Mnangagwa has promised to bring massive investment into the country and hopes to return the country to its former position as the food basket of the continent. However, he is likely to face several challenges; unemployment in Zimbabwe is currently close to 90 percent, and the battered economy will take time to gain a footing.

“The economic situation in Zimbabwe remains very difficult,” said Gene Leon, the IMF mission chief for Zimbabwe. He added that the country needed to resolve arrears to the World Bank, African Development Bank and the European Investment Bank, among other reforms, for the IMF to consider future financing request from the country. He also called on Zimbabwe to implement strong macroeconomic policies and structural reforms to restore fiscal and debt sustainability.

Key to the success of Zimbabwean economy rests on whether influential Western financial institutions will support the new government, or wait for new elections to be held.


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