Zimbabwe Expects to Reach Staff Level Agreement with IMF by June, Boosting Investor Sentiment

Strategic Insights -

Zimbabwe's finance minister, Professor Mthuli Ncube, has stated that the country expects to reach a Staff Level Agreement (SLA) with the International Monetary Fund (IMF) by June this year. This milestone is anticipated to boost investor sentiment and support the country's economic reform programme. The SLA is a significant precursor to a formal financial support programme, reflecting consensus between IMF technical staff and government authorities on a broad set of reforms required to address economic imbalances. The agreement will pave the way for further high-level negotiations that could lead to financial assistance under an IMF-supported programme.

Key Takeaways:

  • The Zimbabwean government has made significant progress in its economic reform agenda, with key achievements including the transfer of legacy debt obligations from the Reserve Bank of Zimbabwe's quasi-fiscal operations to the Treasury and the launch of the Zimbabwe Gold (ZWG) currency in April 2024.
  • The country has resumed token payments to international creditors, beginning with the March quarterly payments to the 16 Paris Club members and the three International Financial Institutions (IFIs).
  • The government has maintained a fiscal deficit below two percent of GDP, with expenditure aligned to available revenue, and new revenue measures have been introduced to widen the tax base.
  • The Structured Dialogue Platform (SDP) has been launched to institutionalise engagement with creditors, development partners, and stakeholders, and the African Development Bank is supporting the process through the UA3 million (US$4 million) Support for Arrears Clearance and Governance Enhancement (Sacage) Project Grant.
  • The country's total Public and Publicly Guaranteed (PPG) debt stock stood at US$21 billion as of December 2024, comprising external debt of US$12,2 billion and domestic debt of US$8,8 billion.
  • The Government now plans to introduce a fourth pillar, focusing exclusively on debt resolution, to facilitate a transparent and inclusive approach to resolving long-standing debt issues.

Statistics:

  • The country's economy is projected to grow by six percent this year, with improved agricultural output expected due to better weather conditions and a projected increase in global trade activity.
  • The Zimbabwe Gold (ZWG) currency was launched in April 2024, with the exchange rate now determined through a Willing Buyer, Willing Seller (WBWS) system on the interbank market.
  • The 2025 National Budget maintains a fiscal deficit below two percent of GDP, with expenditure aligned to available revenue.
  • The government has introduced new revenue measures to widen the tax base, including a 10 percent withholding tax on gross winnings from sports betting, a fast-food levy, taxation of the informal sector, and a 0,5 percent royalty on quarry stone sales.
  • The total Public and Publicly Guaranteed (PPG) debt stock stood at US$21 billion as of December 2024, comprising external debt of US$12,2 billion and domestic debt of US$8,8 billion.

Sources:

  • "Zimbabwe Expects to Reach Staff Level Agreement with IMF by June, Boosting Investor Sentiment" (Source: [Press release from the Ministry of Finance and Economic Development])
  • "Zimbabwe's Finance Minister Confident on IMF Deal" (Source: [Report by The Herald, Zimbabwe])
  • "IMF Projects Zimbabwe's Economy to Grow by Six Percent This Year" (Source: [Press release from the International Monetary Fund])
  • "Zimbabwe's Debt Resolution Strategy Gains Momentum" (Source: [Report by The Standard, Zimbabwe])
  • "African Development Bank Pledges to Support Zimbabwe's Economic Reform Agenda" (Source: [Press release from the African Development Bank])