The Executive Board of the International Monetary Fund (IMF) has completed its 2025 Article IV consultation with Zimbabwe, following discussions on the country’s economic situation and policy direction.
Zimbabwe has shown some macroeconomic stability despite ongoing policy challenges. Economic growth had slowed from 5 percent in 2023 to 1.7 percent in 2024 due to a severe drought that reduced agricultural output and hydro-power generation, impacting other sectors through power shortages. Lower prices for key metal exports also contributed to weaker mining activity. However, the economy recovered in early 2025, supported by improved climate conditions, high gold prices, and steady remittance inflows.
Fiscal pressures have grown recently. By 2024, net external financing was negative and special drawing rights (SDR) allocated for budget support were fully used. Revenue collection improved between 2023 and 2024 through reduced VAT reliefs, new taxes on public sector allowances introduced during the pandemic, increased fees and levies, and efforts to curb smuggling. Nonetheless, spending needs rose as well—driven by higher public wages, capital expenditures, debt taken over from the Reserve Bank of Zimbabwe (RBZ), and obligations related to acquiring assets for the Mutapa Investment Fund. The fiscal deficit remained largely unchanged between 2023 and 2024 but was financed mainly by issuing Treasury bills and direct borrowing from the RBZ’s overdraft facility. This led to an expansion of domestic liquidity—the ZiG monetary base grew by about 215 percent between April and September 2024—and resulted in nearly US$600 million in domestic expenditure arrears by year-end.
After a sharp drop in ZiG’s value at end-September 2024, the RBZ stopped using monetary financing for government debt service obligations. The central bank raised statutory reserve requirements for both ZiG and foreign currency deposits while increasing its policy rate. These actions narrowed the gap between official (Willing-Buyer-Willing-Seller) and parallel exchange rates; as a result of slower growth in ZiG supply—from October 2024 to April 2025—the exchange rates stabilized and monthly inflation fell to just 0.3 percent by June 2025.
Looking ahead, Zimbabwe’s economic growth is projected to rebound to six percent this year due to a strong agricultural season, record gold prices, and continued remittance flows. The current account surplus is expected to widen as well; however, foreign reserves remain low even with recurring surpluses. Medium-term growth is forecasted at around three-and-a-half percent per year amid weak market confidence in sustained stabilization efforts and fiscal pressures that limit private sector expansion.
The IMF noted persistent risks such as potential returns to monetary financing practices that could undermine progress on inflation control.
Zimbabwe continues working toward reengagement with international creditors through the Structured Dialogue Platform (SDP), which focuses on economic reforms, political-governance reforms, farmers’ compensation issues, and land tenure reforms—key steps needed for debt sustainability and access to concessional finance.
The IMF Executive Board assessed these developments positively but highlighted remaining challenges:
Executive Directors “welcomed the recent tightening of policies,” including halting quasi-fiscal operations that helped reduce inflation but observed that “important challenges remain from fiscal financing pressures…limited access to official external financing…low reserve buffers…a persistent gap between official and parallel exchange rates…and governance vulnerabilities.” They recommended further reforms aimed at long-term macroeconomic stability.
Directors emphasized “that a tighter fiscal stance is needed” involving both revenue enhancements—such as rationalizing tax incentives—and spending controls focused particularly on public compensation costs while safeguarding social programs and investment outlays.
They called for improvements in public financial management systems as well as stronger governance frameworks around entities like the Mutapa Investment Fund: “Directors emphasized the need to strengthen public financial management…and…the governance framework for the Mutapa Investment Fund.”
On monetary policy issues: “Directors underscored the importance of enhancing monetary and FX frameworks,” recommending less central bank intervention in FX markets over time along with greater clarity regarding currency transition plans.
Financial sector oversight improvements were welcomed: “Directors welcomed progress towards strengthening financial sector oversight,” encouraging adoption of international standards such as Basel III capital rules.
Closing structural gaps—including accelerating anti-money laundering/counter-financing terrorism reforms—was seen as critical for reducing vulnerabilities: “They welcomed recent progress on AML/CFT reforms…an acceleration of these…was critical for reducing vulnerabilities.”
Finally, Directors recognized Zimbabwe’s continued engagement with creditors under SDP: “They acknowledged that Zimbabwe continues its reengagement with international creditors under…the Structured Dialogue Platform…”
The next Article IV consultation is expected within twelve months.