1

Building resilience

Christian Beddies, IMF Resident RepresentativeZimbabwe Economic Review

ConferenceOctober 20, 2016

Harare

Roadmap

• Zimbabwe’s economic situation• External shocks• Building resilience

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Projected growth paths...

3.4

6.1 6.4 6.57.9

4.53.8

1.1-0.3

-2.5

4.53.8

1.1 1.2

4.8

2013 2014 2015 2016 2017

GROWTH RATESZIMASSET VS ACTUAL

Zimasset growth figures IMF estimates Authorities estimates

Credit to private sector

4

-20

-10

0

10

20

30

40

50

60

70

Y-o-Y change

550570590610630650670690710730750

Jan

2014

Jul 2

014

Jan

2015

Jul 2

015

Jan

2016

Total electricity consumption(GWh)

Declining volume of fuel sales(Index: June 2014=100)

6

60 70 80 90

100 110 120

Jun

2014

Aug

2014

Oct

201

4

Dec

201

4

Feb

2015

Apr 2

015

Jun

2015

Aug

2015

Oct

201

5

Dec

201

5

Feb

2016

Apr 2

016

Jun

2016

Aug

2016

Oct

201

6

7

Status quo

Budget Deficit

Fragile financial

sector

Private Sector

Contraction

Social cost

Inflation

pressures

External shocks...

• Fluctuating commodity prices– Zimbabwe's key commodity exports are gold, platinum,

nickel

• Global growth slowdown leading to falling demand • Lower economic activity in migrant host countries

affecting inflows of remittances and export earnings

• Exchange rate movements affecting inflows of remittances and export earnings

Major Export Prices(y/y percent change)

-60

-40

-20

0

20

40

60

80

100

120

140

160

Tobacco ($) Diamonds (index) Nickel Gold

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.520

10

2011

2012

2013

2014

2015

2016

Proj

.

Average Real GDP Growth of Top 5 Export Partners(percent change)

What makes the situation more fragile

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Domestic factors in Zimbabwe

• Policy inconsistency in a difficult political environment

• Widening fiscal gap threatening private sector-led growth

• Low productivity • Institutional issues

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Building resilience

• Fight the “fragility trap” – Build resilience through creating a competitive market-based

economy– Reach a common vision - adoption of policies and reforms

that promote socioeconomic stability and enjoy broad-based ownership

– Fully implement the constitution• Build state capacity• Strengthen institutions and institutional arrangements• Strengthen governance

– Produce - value addition, strong and private sector-led growth – Build buffers - fiscal buffers, reserves

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The re-engagement process a recap

Steps in arrears clearance• 1st Step - clear arrears to IFIs (AfDB, IMF and WB)• 2nd Step - Design an economic programme that

addresses the deep rooted structural issues and can be supported by the IFIs

• 3rd Step – need for financing assurances from IFIs and bilaterals to ensure the projected financing gaps can be closedLima is work in progress

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Key tenets of an economic program

• Recall the May 2016 Article IV report:Fiscal discipline and rebalancing expenditure away from

employment costs toward development and social spending to restore fiscal sustainabilityEnhancing financial stability and depth -> savings

mobilization and investment and contribute to economic developmentTackling the external arrears and advancing the

reengagement process to allow the country to eventually access external financingAddressing structural weaknesses to boost Zimbabwe’s

growth potential

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Useful links

• General IMF websites:www.imf.org and www.imf.org/zwe (our local

website)• Debt sustainability

http://www.imf.org/dsa

• Paris Club

http://www.clubdeparis.org/en/

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Thank you!

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