The International Monetary Fund (IMF) has placed a seal of approval on Zimbabwe's macroeconomic policies, after the global lender glowingly praised the diminished reliance on central bank financing.
The multilateral lender underscored the need to sustain the transformative policies to secure long-term economic stability.
The IMF observed that the Government, through the Reserve Bank of Zimbabwe, has significantly curtailed its historical tendency to turn to the central bank for funding, which destabilised the economy.
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The "repeated recourse to central bank financing," the fund noted, had been the primary driver of Zimbabwe's enduring economic woes, directly fuelling inflation, exchange rate volatility and the difficult foreign exchange environment that has plagued the southern African nation.
"It will be important for Zimbabwe to sustain that (policy regime) because it's this repeated recourse to central bank financing that has created a lot of difficulties in the past also with inflation, with exchange rate volatility and the difficult foreign exchange environment that the country has," IMF African Department director, Mr Abebe Aemro Selassie told the media during the presentation of the lender's latest Regional Economic Outlook for sub-Saharan Africa last Thursday
"So, we are encouraged by what the Government has been doing in recent months and I think that needs to be sustained. Like all countries, a combination of current policies and continued refinement of policies will be key to helping Zimbabwe move forward," Mr Selassie added.
Analysts believe the IMF sees Zimbabwe still walking on a somewhat "tightrope." While the progress toward stability is lauded, they warn that a relapse, particularly into money printing, would be a serious misstep, as that would undo the entire progress.
Securing the momentum is thus entirely dependent on "responsible commitment to the current policy regime."
"What the IMF is basically saying is that the green shoots of stability are welcome, but Zimbabwe must remain on a tightrope of reform," economist Tobias Musara said.
"Slipping back into the easy, inflationary habits of the past would rapidly undo the recent progress, plunging the country back into the difficulties of high inflation and currency turmoil.
"Sustained discipline, therefore, is the non-negotiable key to helping the nation move forward."
For years, the printing of money to cover fiscal deficits created a vicious cycle.
In the past, surges in the money supply destabilised the exchange rate, leading to runaway inflation that eroded the value of savings and the local currency. By pulling back on this practice, the RBZ has taken a crucial step toward establishing the fiscal discipline necessary for durable macroeconomic stability.
"We're encouraged by what the Government has been doing in recent months and I think that needs to be sustained," Mr Selassie said.
Mr Musara said the emphasis on the need to sustain the policy direction highlights the IMF's view that temporary policy fixes would be insufficient.
"Zimbabwe's economic credibility hinges on demonstrating a permanent break from the inflationary financing model of the past," said Mr Musara.
The IMF's analysis points to a future where stability is not a guaranteed outcome but a product of continuous "refinement."
Like all countries, Zimbabwe's progress will depend on a combination of current policies and continued refinement of policies.
This means more than just limiting central bank borrowing; it requires a holistic approach to managing the economy, including maintaining budget discipline and financing expenditures through sustainable, non-inflationary means.
Previously, whenever the Government issued large, one-time payments (bullet payments) to contractors, especially for key infrastructure projects, it inadvertently triggered exchange rate volatility against major currencies.
This ensued pressure that stemmed from contractors quickly disposing of the local funds on the parallel market to acquire US dollars, to hedge against inflation, offering high rates to outbid other currency seekers.
Finance, Economic Development and Investment Promotion permanent secretary, Mr George Guvamatanga, recently noted that the economy is experiencing its longest period of stability since the advent of the Second Republic
"Starting with macro-economic growth and stability, since the coming of the Second Republic . . . The economy has recorded its longest streak, if I may put it that way, of said uninterrupted stability since the measures the Government took in September of 2024," said Mr Guvamatanga.
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The ZiG is trading at approximately 26,71 per US dollar. It has maintained a relatively stable trajectory since the central bank devalued the currency by 43 percent on September 27, 2024, to address pricing distortions in the economy.
Dr John Mushayavanhu, upon taking office as the governor of the central bank in April last year, made a strong pledge to stop the practice of printing money to fund Government expenditures.
He emphasised that his mandate, as defined in the Reserve Bank Act, was strictly discharging his monetary policy duties and had no intention of encroaching on the duties of other Government departments. Essentially, he promised to stick to the central bank's core job and refuse to participate in the printing of money that financed projects the Government should ordinarily fund through taxes or borrowing, a practice that historically fuelled Zimbabwe's severe hyperinflation and currency volatility.
In its recent Article IV consultation, the IMF Executive Board formally acknowledged that the decisive halting of quasi-fiscal operations and monetary financing was the key development that has allowed Zimbabwe to achieve a degree of macroeconomic stability and lower inflation.
