This 2019 Article IV Consultation focuses on Zimbabwe’s near- and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic that has resulted in unprecedented strains in global trade, commodity, and financial markets. It, therefore, does not reflect the implications of these developments and related policy priorities. The outbreak has greatly amplified uncertainty and downside risks around the outlook. The IMF staff is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Zimbabwe and globally. With another poor harvest expected, growth in 2020 is projected at near zero, following a sharp contraction in 2019, with food shortages continuing. With no progress on clearing longstanding external arrears, the authorities face a difficult balance of pursuing tight monetary, to reduce very high inflation, and fiscal policies to address the macroeconomic imbalances and build confidence in the currency, while averting a crisis. Pressures are mounting to increase spending on wages and for social protection to mitigate the impact of the weather shocks and high inflation. While the 2020 budget includes a significant increase in social spending, it is likely insufficient to meet the pressing needs.
This Selected Issues paper and Statistical Appendix analyzes recent trends in poverty and social indicators for Zimbabwe. It discusses land reform, agricultural policies, and the outcomes. The paper presents background information on the evolution of inflation and money aggregates in Zimbabwe. It analyzes the demand of money since the late 1990s, and discusses factors that can lead to diverging paths of inflation and money growth in the short term. The paper also analyzes Zimbabwe’s export performance in recent years, and identifies the factors that could improve export performance, from both a quantitative and qualitative perspective.
Agriculture is an important sector of the Zimbabwean economy. At independence, land ownership was highly skewed, as the sector was dominated by a few commercial farms. The initial phases of land reform, along with liberalization of the agricultural sector throughout the 1990s, helped to increase Zimbabwe’s agricultural productivity, but these gains have been reversed over the past few years. After the bumper crop season of 1999/2000, yields have plummeted, owing to droughts and the disruption of commercial farming under the Fast-Track Land Reform Program. The future of the sector is largely dependent on the success of resettled farmers, which requires better weather conditions, the availability of inputs and capital, and a stable economic environment. Preliminary data for the 2002/03 crop season indicate that, for many of Zimbabwe’s main crops, production continues to be low.
This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.