IMF dismisses govt figure, projects 2.5% GDP growth
THE International Monetary Fund (IMF) sees Zimbabwe’s economy growing by a modest 2.5% against a new government estimate of 6% as the multilateral lender warns of funding constraints in the sub-Saharan Africa region.
The southern African nation is facing high levels of inflation, a weakening domestic currency, high unemployment, huge debt overhang and most recently an energy crisis, which experts say will weigh down on economic growth.
According to a new IMF report titled Regional Outlook, Sub-Saharan: The Big Funding Squeeze, growth in the region will decline to 3.6% in 2023 amid a global slowdown.
A shortage of funding may force countries to reduce resources for critical development sectors like health, education, and infrastructure, weakening the region’s growth potential.
“Many countries will register a small pickup in growth this year, especially non-resource-intensive economies, but the regional average will be weighed down by sluggish growth in some key economies, such as South Africa,” the IMF says.
“Unlike many major advanced economies, countries in sub-Saharan Africa had limited fiscal space entering the pandemic recession, hampering policymakers’ ability to mount an effective response.
“The lack of fiscal space has also made it challenging for countries to address the vast social needs, especially those in the most vulnerable segments of the population. Insufficient funding meant that the authorities struggled to scale up targeted support when the region faced record-high food, fuel, and fertilizer prices in 2022.”
Debt-ridden Zimbabwe has since the turn of the millennium failed to access concessional funding from traditional multilateral financial institutions such as the World Bank, African
Development Bank and the IMF after it went into arrears. The country now depends on domestic resources such as taxes, debt instruments and costly loans from regional financiers to fund its capital projects.
“In fact, the cost-of-living crisis remains a major concern for sub-Saharan Africa given the high incidence of poverty—35% of the population in sub-Saharan Africa was estimated to live under $2.15 a day as of 2019 (latest available data from the World Bank Low-Income Dataset),” the report reads.
Sub-Saharan Africa, the IMF further projects, is poised to grow at 4.2% in 2024 from 3.6% in 2023. Almost four-fifths of the countries are projected to register a growth pickup in 2024, driven by higher private consumption and investment.
Despite the IMF painting a not-so-rosy picture of the region, the authorities in Harare remain upbeat that Zimbabwe — which the multilateral lender ranked among countries in fragile and conflict affected situations — will this year register strong growth. Zimbabwe and Mozambique are the only Southern African Development Community states in this group, according to the IMF report.
Two weeks ago, the authorities said the gross domestic product (GDP) is now expected to increase from the current projection of 4% to 6% on account of the positive performance of the agricultural sector.
But the IMF says the region should brace for turbulence.
“Policymakers in sub-Saharan Africa are looking at yet at another difficult year, facing tighter financing conditions on top of the ongoing repercussions from a recent cascading series of shocks,” the IMF says.
“Despite serious financing constraints, there are still a few policy levers available to alleviate the situation. For instance, domestic revenue mobilisation offers a potential source of financing. Moreover, improving domestic legal and regulatory frameworks and undertaking financial systems reforms would not only attract much-needed climate finance but also other types of private finance to the region that can help address basic needs and development goals in addition to those arising from climate change.”