Zimbabwe's central bank governor, John Mangudya. File picture: Philimon Bulawayo, Reuters

Harare – The International Monetary Fund (IMF) says Zimbabwe needs to act now if it is to reverse the deepening economic difficulties.

IMF head of mission to Zimbabwe Domenico Fanizza said the investment-hungry country needed not wait any longer, but act on its policies.

“Economic difficulties have deepened. Zimbabwe cannot wait and needs to act now. The El Niño-induced drought has hit the economy hard. Lower commodity prices and the appreciation of the United States dollar have compounded difficulties. Policy action is needed to reverse this trend,” Fanizza said on Wednesday.

He said once the IMF staff-monitored programme was completed successfully - as an initial step toward reform and re-engagement with international partners – a comprehensive and ambitious economic transformation programme would be needed to revive Zimbabwe’s economy and cement support among international partners.

Fanizza added that the authorities had met all quantitative targets and structural benchmarks of the final SMP (staff-monitored programme) review.

Zimbabwe has been holding discussions with the IMF team over economic developments, near and medium-term outlook and risks for the country, implementation of the policies and reforms under the SMP, and near and medium-term policies that could help remove hurdles to growth.

The IMF head of mission said fiscal discipline was the key priority, adding given the lack of resources, government needed to keep the cash primary accounts close to balance as this heightened the urgency of re-engagement with the international community.

In the financial sector, Fanizza said significant progress had been made, but risks remained.

“It will be important to continue with strong proactive supervision, further reduce non-performing loans and deliver on financial inclusion as outlined in the national financial inclusion strategy to reinforce confidence and cement financial stability,” he said.

Also, improving the business environment was cited as key. In particular, the consistent and transparent implementation of the indigenisation policy will be critical to attract both foreign and domestic investment by limiting the scope for discretion.

This will go a long way to unleash Zimbabwe’s growth potential. The bankable land leases which the authorities are finalising will help to boost productivity and access to financing in agriculture, the IMF team said.

“We are encouraged that the authorities plan to clear the outstanding arrears with international financial institutions, as outlined at the Lima meetings. The successful resolution of Zimbabwe’s external payment arrears will be an important step toward normalizing relations with the international financial community and will allow the country to eventually seek a Fund financial arrangement. It will also send strong signals to the international community, reduce the perceived country risk premium, and unlock affordable financing for government and the private sector. This, together with policy reform, will help to achieve sustained economic development through economic transformation, to improve living conditions for the people of Zimbabwe, and to reduce poverty.”

During discussions, the IMF team met with Zimbabwe’s Finance Minister Patrick Chinamasa, Lands and Rural Resettlement Minister Douglas Mombeshora, ppublic sservice, Labour and Social Welfare Minister Prisca Mupfumira, Chief Secretary to the President and the Cabinet Misheck Sibanda and Reserve Bank of Zimbabwe governor John Mangudya.