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International Monetary Fund

This 2005 Article IV Consultation highlights that Zimbabwe’s pace of economic deterioration slowed somewhat in 2004, but appears to have picked up again in the first half of 2005. IMF staff estimates that real GDP fell by about 4 percent in 2004, compared with a contraction of 10½ percent the preceding year. Monetary policy has been tightened, but not consistently. Overnight interest rates were raised sharply in early 2004 and lowered subsequently as inflation declined, with real interest rates maintained at high levels for most of the year.

Mario Pessoa, Andrew Okello, Artur Swistak, Muyangwa Muyangwa, Virginia Alonso-Albarran, and Vincent de Paul Koukpaizan
The value-added tax (VAT) has the potential to generate significant government revenue. Despite its intrinsic self-enforcement capacity, many tax administrations find it challenging to refund excess input credits, which is critical to a well-functioning VAT system. Improperly functioning VAT refund practices can have profound implications for fiscal policy and management, including inaccurate deficit measurement, spending overruns, poor budget credibility, impaired treasury operations, and arrears accumulation.This note addresses the following issues: (1) What are VAT refunds and why should they be managed properly? (2) What practices should be put in place (in tax policy, tax administration, budget and treasury management, debt, and fiscal statistics) to help manage key aspects of VAT refunds? For a refund mechanism to be credible, the tax administration must ensure that it is equipped with the strategies, processes, and abilities needed to identify VAT refund fraud. It must also be prepared to act quickly to combat such fraud/schemes.
International Monetary Fund. African Dept.
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.
International Monetary Fund
This 2004 Article IV Consultation highlights that Zimbabwe’s real GDP declined by 9.3 percent in 2003, and an additional broad-based decline is projected in 2004. Year-over-year inflation reached 600 percent during November 2003–February 2004. However, monthly inflation, which had reached 34 percent in November 2003, fell to 5 percent in April 2004 following a tightening of monetary policy and an appreciation of the exchange rate. Progress has been limited on structural reforms. Most price controls were removed after May 2003, and the fuel market was partially liberalized.
International Monetary Fund
This 2001 Article IV Consultation highlights that Zimbabwe’s economic crisis has continued to deepen. The deterioration has mainly been the result of inappropriate macroeconomic policies and a general breakdown in the rule of law in the context of the government’s fast-track land reform program launched in early 2000. This deterioration has undermined investor confidence, contributed to the rise in unemployment, destroyed capital, and eroded institutions important for economic development, thereby darkening the longer-term outlook. Real GDP is projected to contract by 8½ percent in 2001.
Mr. Arto Kovanen
This study examines the appropriateness of alternative intermediate monetary policy targets for Zimbabwe in light of the stability of the demand for money and the information content of financial variables for predicting price level movements. Results of the study indicate that a well-defined long-run demand relation exists for currency in circulation, but not for other monetary aggregates. Currency in circulation has strong information content for predicting future price level movements. The information content of other financial variables, such as the exchange rate and interest rates, is weaker. Statistical relationships break down of the outset of high inflation.
Ms. Sònia Muñoz
The paper investigates the divergence between inflation and monetary expansion in Zimbabwe since late 2003. The substantial decline in velocity and increasing levels of real money balances during 2004 are at odds with a record of inflation closely tracking the growth rates of monetary aggregates in the past. Possible explanations for the divergence include an unstable demand for money, a sudden shift in the underlying demand for real balances due to a sharp change in an explanatory variable, and a structural break or aberration in a normally stable money demand relation reflecting some unexplained factor such as repressed inflation (given administered prices) or measurement errors in the consumer price index. The results of the study point to the last possibility as the most likely explanation.
International Monetary Fund
The paper presents a model of fiscal dominance with borrowing constraints, and provides evidence for a large number of sub-Saharan African countries on the relative importance of fiscal and monetary determinants of inflation. Based on the dynamic response of inflation to different shocks, including nominal public debt, results show that a number of SSA countries were characterized throughout the period 1980-2005 either by chronic fiscally dominant regimes, with weak or no response of primary surpluses to public debt; or by a consistent adoption of a monetary dominant regime. However, a number of countries were also characterized by lack of a clear monetary and fiscal policy regime. The study also finds that changes in nominal public debt affect price variability via aggregate demand effects, suggesting that fiscal outcomes could be a direct source of inflation variability, as predicted by the fiscal theory of the price level.
Sylviane Guillaumont Jeanneney and Mr. Kangni R Kpodar
This article investigates how financial development helps to reduce poverty directly through the McKinnon conduit effect and indirectly through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.
International Monetary Fund. African Dept.


Les perspectives restent prometteuses pour la région, mais l'évolution de la situation mondiale présente des risques accrus. La croissance en Afrique subsaharienne devrait à nouveau s'établir aux alentours de 6,5 % en 2008, avec les pays exportateurs de pétrole en tête de peloton ; dans les pays importateurs, la croissance devrait par contre se tasser modérément. Les prix des denrées alimentaires et de l'énergie augmentant encore, l'inflation devrait s'établir en moyenne à environ 8,5 % cette année dans les pays de la région, à l'exception du Zimbabwe. La tendance des risques que pour 2008 est plutôt négative, mais la région est aujourd'hui mieux placée pour résister à une dégradation de la situation mondiale.