Zimbabwe: IMF Blames Mthuli Ncube's Policies for Igniting Economic Chaos

Bond Notes.
27 September 2019

The International Monetary Fund (IMF) has blamed Finance Minister Mthuli Ncube's currency reforms for igniting the current volatile economic mess amid spiralling foreign currency exchange rates which have triggered runaway inflation.

This is according to a Thursday statement by the global financier upon its representatives' completion of an assessment on progress being made under the Staff Monitored Programme.

The two-member delegation comprised Chief of the African Department Gene Leon and deputy director, David Robinson.

"Since the February currency reform, the exchange rate has depreciated from USD 1:1 ZWL to USD 1:16.5 against the Zim-dollar as of September 23, fostering high inflation, which reached almost 300 percent year-over-year in August," Leon said.

IMF said during the period under review, social conditions have deteriorated sharply, with more than half of Zimbabwe's population estimated by the United Nations to be food insecure in 2019/2020.

The global bank pointed out that confidence in the country continues to weaken amid policy uncertainty, a continuation of foreign exchange market distortions, and a recent expansionary monetary stance has increased pressure on the exchange rate.

On top of the complicated situation, another high government over-expenditure has been made.

Said Leon, "Risks to budget execution are high as demands for further public sector wage increases, quasi-fiscal activities of the Reserve Bank of Zimbabwe that will need to be absorbed by the central government, and pressure to finance agriculture could push the deficit back into an unsustainable stance."

The remarks come at a time when the troubled Southern African country introduced tough austerity under the Treasury's Transitional Stabilisation Programme with a giant government over-expenditure hitting US$2.7 million between January and September 2018 alone.

IMF added that the adjustment challenges were magnified by slow progress on international re-engagement efforts.

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