Journal Issue
Share
Article

Zimbabwe: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
October 2005
Share
  • ShareShare
Show Summary Details

VII. The Soundness of the Zimbabwe Banking System55

78. Faced with contraction in the economy and the challenges of unsustainable exchange rates and high interest rates, the Zimbabwe banking system continues to demonstrate remarkable resilience. With the exit of identified weak institutions in 2004, the sector is now largely populated by banks with high capital adequacy ratios, little foreign currency risk and loans books limited to about one quarter of assets. High nominal yields on treasury bills and an emphasis on zero-cost demand deposits has contributed to strong profitability. Stress testing confirms that individual institutions have limited vulnerability to even extreme shocks. This resilience, however, comes at the expense of limited financing for the real sector, very high costs to the small number of creditworthy borrowers, and the discouragement of savings through the negative real interest rates paid to depositors.

79. This paper presents an overview of the developments and the performance of the Zimbabwe banking sector and is structured as follows. Section A presents the structure of the financial system while section B discusses the weaknesses in the banking sector during the period 2003-2004 and section C evaluates the approach to dealing with these problems. Section D discusses the impact of the exchange rate regime and interest rate policies on the financial sector while section E considers the financial sector soundness and resilience. Section F deals with deposit insurance and section G concludes.

A. Structure of the Financial System

80. Zimbabwe has all the elements of a modern developed financial sector, including life and general insurance, public and private pension funds and active capital markets including the Zimbabwe Stock Exchange and twelve stockbrokers. 56 The banking sector comprises twelve commercial banks, five merchant banks, five discount houses, four finance houses and four building societies (Table 1).

Table 1.Financial System Structure
December, 2004Total Assets (US$ million) 1/Percent of TotalPercent of GDP 2/
Commercial banks2,818.6279.680.0
Merchant banks208.345.95.9
Building societies166.334.74.7
Finance Houses59.361.71.7
Discount Houses42.311.21.2
Post Office Savings Bank32.850.90.9
Insurance and Pension funds153.164.34.3
Prescribed securities59.341.71.7
Microfinance Institutions......
Total Financial system3,540.31100100.5
Source: Reserve Bank of Zimbabwe (RBZ).

Converted at Official exchange rate.

Source: Reserve Bank of Zimbabwe (RBZ).

Converted at Official exchange rate.

81. Commercial banks dominate the financial system, and the largest five banks (two majority domestically owned and three foreign owned) account for 65 percent of banking sector assets. The majority foreign-owned banks accounted for 45 percent of banking sector assets at end-March 2005 (Appendix 1). Bank branches are widespread as evident from a total of 429 branches at end-March 2005. Of these, 219 are building society branches while 192 are commercial bank branches, 124 of which belong to the largest five banks.

B. Weaknesses in the Banking Sector in 2003-04

82. The macro-economic developments in 2003-2004 brought to light underlying weaknesses in the financial sector. Notable among these were poor standards of corporate governance, inadequate risk-management, and the use of depositors’ funds for speculative investments. In addition, there was abusive self-dealing, including unreported insider transactions, use of subsidiaries and affiliates to evade prudential limits, and use of RBZ liquidity advances to support group companies and deliberate misreporting to RBZ to conceal losses and overstate capital. These were most prevalent and damaging in the “new generation” of deposit-taking institutions licensed in the 1990s.

83. A contributing factor to the weaknesses in the banking sector was inadequate supervision. Both the number of staff and their level of training and experience was less than required for appropriate supervision, with the further shortcoming that the ultimate supervisory authority rested with the Ministry of Finance rather than the RBZ. Thus, the independence of the RBZ was limited by the need to refer licensing decisions to the Ministry of Finance. As a result, even when serious problems were identified in the banking sector, there was more likely to be forbearance than decisive supervisory action.

84. Pressures were already evident in the banking sector by December 2003, with dependence by banks on RBZ advances having increased significantly over the year (Figure 1). Some of this nominal increase was due to the effects of high inflation, but considering that total RBZ advances increased from an amount equal to about 4 percent of bank deposits at mid-year to 15 percent at end-2003, it is clear that some banks were having increasing difficulty funding themselves with deposits (Figure 2). These pressures continued to build following the December 18, 2003 monetary policy statement, which increased statutory reserve requirements effective January 2004 from 20 to 30 percent for commercial banks.

Figure 1.RBZ Liquidity Support to Banks

($Z billions)

Source: Reserve Bank of Zimbabwe.

Figure 2.Bank Dependence on RBZ Funding

Source: Reserve Bank of Zimbabwe.

C. Addressing the Banking Sector Problems

85. The RBZ recognized the need to address both the underlying weaknesses that had led to the emergence of problem banks, as well as to resolve the identified weak banks. A package of policy measures was introduced to address the underlying weaknesses in the system by strengthening supervision and prudential standards, and thus check the flow of new problem banks. However, the delay in intervening in some banks making heavy use of RBZ liquidity support increased losses to depositors and other creditors. Also, it appears that the decision to expend public funds for bank restructuring was not motivated by concern over the potential systemic risk, but to preserve the existing level of indigenous ownership of the banking system. Such policy decisions are within the purview of government, but it is important to identify the full cost of these policies.

86. Transferring the powers of the Registrar from the Ministry of Finance to the RBZ through the Financial Laws Amendment Act in August 2004 was one of the most important measures to enhance the soundness of the banking system. The significance is two-fold. First, having obtained the authority for bank licensing, the RBZ is better placed to ensure that potential new entrants to the market meet stringent standards, thus avoiding the problems that can be generated by licensing weak banks. Second, it enhanced RBZ’s ability to take corrective actions. Equally important in enhancing the credibility of the RBZ was the placement of weak institutions into curatorship or liquidation, which clearly signaled a break from past practices of forbearance.

87. The enhanced credibility of the RBZ was used to enforce compliance with prudential requirements and its supervisory authority was extended to include asset management companies. New prudential guidelines were issued in 2004 to establish minimum standards for corporate governance, internal audit, and the relationship between the supervisor and external auditors. Further, significant steps were taken in 2004 to strengthen the practice of banking supervision, through recruitment of new staff, ongoing training for examiners including through the Financial Stability Institute and regional seminars and the introduction of electronic submission of prudential returns and an automated system for supervisory analysis. These measures were in addition to the continuation of earlier initiatives to introduce risk-focused supervision and consolidated supervision of banking groups.

88. Decisions on problem bank resolution appear to have been driven more by the policy objective of maintaining indigenous ownership rather than concerns about systemic stability. It is possible, however, that in early 2004 uncertainty about the true state of the financial system could have raised concerns about the potential for the failure of a number of smaller banks to have a contagion effect which might threaten larger banks and hence systemic stability.

89. Provision of open-ended liquidity support is also consistent with the long-established practice of the RBZ in dealing with problem banks, dating from well before the bank problems of 2003-2004. The initial hope that banks would be able to work through their problems has proved ill-founded. Liquidity and time were not enough to address the underlying problems in many banks, and the decision to place nine licensed deposit-taking institutions in curatorship during 2004, and three other institutions in liquidation was a departure from the previous adherence to the “wait and hope” approach to problem institutions.

90. It seems clear in retrospect, even if there was uncertainty at the time, that the difficulties faced by the banking sector in 2003-2004 were not systemic. The institutions intervened in 2004 were all relatively small, collectively accounting for only about 12 percent of bank deposits and 16 percent of assets (Appendix 2). The flight of depositors to perceived quality in late 2003 and early 2004 improved the already satisfactory liquidity of the five largest banks. Considering that throughout the period of turmoil, institutions constituting the majority of the banking market remained sound and any threat of contagion was limited to smaller banks, the risk of systemic crisis was not nearly great enough to justify the provision of liquidity support to insolvent banks.

91. The decision to extend liquidity support to banks identified through on-site examinations as insolvent has proved costly, although the effects of high inflation obscure the true costs. Recoveries by curators and liquidators are impressive in nominal terms. The value of physical assets of banks (for example staff cars) as well as the chattels and property held as security for loans, has increased at or above the rate of inflation, while interest ceased to accrue on the liabilities of the institution at the date of closure. Thus, while depositors and other creditors are likely to receive significant nominal distributions from the failed banks, in real terms, the depositors and creditors have effectively lost the bulk of their claim

92. The inflationary effect of the over $2 trillion provided in liquidity support through the Troubled Bank Fund (TBF) is another hidden cost of bank restructuring. Had the problem banks been closed earlier rather provided with liquidity support, the RBZ’s efforts to tighten monetary policy would not have had to cope with this injection of money into the system. In addition to the possibility that inflation and interest rates might have been lower, earlier closure of the insolvent banks would have checked the accumulation of losses, reducing the ultimate costs borne by depositors.

93. Total liquidity support from the TBF to the banks placed in curatorship or liquidation in 2004 exceeded three times their total deposit base (as at September 2004). Not all of this Z$ 2 trillion will be lost, and in fact, if Zimbabwe Allied Banking Group (ZABG) is only moderately successful, the entire nominal loss may be more than recouped through the intended sale of ZABG shares (Box 1). Two to three years of high inflation could easily result in a nominal valuation of ZABG well in excess of Z$ 2 trillion, however, it would be a mistake to then view the Troubled Bank Resolution Strategy as a financial success.

94. The final costs to depositors, creditors and the TBF are not yet known for any of the banks placed in curatorship or liquidation in 2004. The write-down of creditors’ claims by the curators of the three banks combined into ZABG resulted in a loss to the TBF of almost Z$ 1.2 trillion, and a portion of the other $1 trillion advanced under the TBF will be lost. As noted above, it is possible that the subsequent sale of ZABG may recoup some or all of these losses in nominal terms, but in real terms, depositors and the TBF have lost the bulk of their claims (Table 2).

Box 1.Zimbabwe Allied Banking Group (ZABG)

ZABG is a kind of “bridge bank,” incorporated to receive assets and liabilities of three failed banks, Barbican, Royal and Trust. The determination was made by the curators of each bank that potential recoveries were greater through this approach than the alternative of liquidation. The basis for the determination was primarily that the branches, physical assets and some loan assets had greater value as a going concern than in liquidation. ZABG was capitalized by the conversion of depositors and creditors claims into equity.*

Attempts to recapitalize banks by conversion of deposits into equity frequently fail for the following reasons:

  • The conversion of the deposits to equity does not address the liquidity problems of the bank

  • The restructured bank continues to be hampered by poor quality assets

  • Forcibly converted depositors often do not make good owners and seek to withdraw their funds at the earliest opportunity, often by taking loans which they have no intention of repaying

However, the current high inflation environment has helped to address these issues.

Recoveries by curators, aided by the inflationary environment, were sufficient to enable cash payments to be offered to depositors with balances of less than Z$5 million, and to provide the recapitalized institution with adequate opening liquidity. When invested in relatively high-yielding treasury bills, combined with the liability side of the balance sheet consisting largely of equity, the restructured bank is positioned to be profitable and liquid from the outset. The 44 branches of the legacy banks have been consolidated into 25, with 250 of 860 former staff retrenched, and about 40 new well-qualified employees recruited, including most of the senior management team. All of the operations of the three legacy banks have now been converted to a single information technology platform, which was less difficult than it might have been as two of the three legacy banks used the same system.

Notwithstanding the promising start, there are significant challenges ahead. The business plan calls for growth in the full range of financial services, and targets may be difficult to achieve against the backdrop of a shrinking economy. For ZABG to be successful, it will have to be operated on a commercial basis without political interference, notwithstanding its public ownership. A good start has already been made with the recruitment of a well qualified board of directors, but experience elsewhere indicates the strong temptation for government to use state-owned banks to implement policies of supporting specific regions and sectors regardless of commercial considerations.

The use of the powers of the curator to sell the assets of the three failed banks to ZABG has been challenged in court. If the plaintiffs (Trust Bank shareholders), are successful, the legal foundation of ZABG could be undermined. There is also uncertainty about the intended conversion of TBF loans into equity in ZABG. ZABG shows the amount as common equity, however, it does not appear that the company incorporated to hold the government shareholding, Allied Financial Services, has yet acquired either the debt or equity, which suggests the need to regularize the holding arrangements for ZABG.

Assuming that ZABG survives the legal challenges noted above, it may be used as a resolution vehicle for other banks currently in curatorship. No firm decisions have been made regarding the intended divestiture process, but it is expected that an initial public offering will be made of a minority shareholding to provide additional capital for expansion. The announced intention is to fully divest public ownership by end-2007.

ZABG Balance Sheet and Income Statement, May 30, 2005(Z$ billions)
AssetsLiabilities and EquityIncome Statement (Jan-May)
Cash, liquids41RBZ (PSF)19Interest income106
Treasury bills174Deposits127Interest expense1
Statutory reserves49Other48NII105
Loans172Preference shares45Non-interest income2
Fixed assets82Common shares570Gross income107
Other294Retained earnings3Non-interest expense86
Total812Total812Loan loss expense2
Net income (pre-tax)19
*Public and private ownership is 87 and 13 percent respectively.
Table 2.Real Costs of Bank Restructuring
Depositors Z$ 5 million or lessDepositors over Z$ 5 million and TBF
Change in CPI from date of curatorship to payment January 2005 (percent)Real value of claim when paid (percent of original claim)Haircut imposed to recapitalize the bank (percent of depositor and creditors claims)Real value of claim after conversion to equity January 2005 (percent of original claim)Real value of claim at end-2005, assuming 190 percent average annual inflation
Barbican98.550.42040.313.9
Royal48.867.25033.611.6
Trust36.873.17518.36.3
Source: Staff estimates from Reserve Bank of Zimbabwe data.
Source: Staff estimates from Reserve Bank of Zimbabwe data.

95. The apparent success of the current approach to bank restructuring is misleading. The real costs are obscured by high inflation, and depositors would be better served by faster and less disruptive resolutions. Ultimately, losses on the TBF will be borne by the taxpayers. It would be more transparent for these losses to be immediately acknowledged, and accounted for as fiscal expenses. This facilitates identifying the true cost of the policy decision to provide liquidity support to insolvent banks, and so is preferable to quasi-fiscal financing by the central bank.

D. Impact of Exchange Rate Regime and Interest Rate Policies

96. Macroeconomic issues create significant challenges for the RBZ in its role as the banking supervisory authority. These have a prudential dimension, as economic contraction, volatile interest rates, high inflation and divergent exchange rates all pose serious risks to the financial sector. In addition, the attempts by the authorities to mitigate the impact on the real sector have led the RBZ to devote significant resources to enforcing regulatory requirements that have no prudential foundation.

97. The high nominal and real interest rates that have been required to counter inflationary pressures and support the official exchange rate present challenges for the banking sector (Figure 3). There are few borrowers, typically exporters or traders, who can sustain real lending rates of about 60 percent by quickly liquidating inventory or selling finished goods to repay the funds borrowed for stock or inputs. Traders pass on these high financing costs to their customers, resulting in a higher cost of goods in the real economy. Exporters, however, may find themselves unable to pass on these higher financing costs. The authorities have attempted to compensate for the lack of competitiveness induced by high interest rates and an overvalued exchange rate in part through concessional interest rates for loans to targeted sectors, and support prices for exporters.

Figure 3.Commercial Bank Lending Rates

(percent)

Source: Reserve Bank of Zimbabwe.

98. These attempts to direct lending to particular sectors have created their own perverse incentives. The recipients of subsidized credit may be tempted to invest the funds in relatively high yielding government debt, or real property and goods in the expectation of earning a quick inflationary gain, rather than using credit for more uncertain commercial returns. Businesses outside the designated sectors are tempted to misrepresent their business to obtain access to credit. Those in productive sectors may borrow unneeded funds, and on-lend at a margin to borrowers unable to access credit. These abuses have led to the increasingly more stringent requirements for borrowers receiving subsidized credit. Whether fully effective or not, the additional restrictions add to the administrative burden on borrowers and banks, and require greater policing activities by the RBZ. The higher administrative burden and lower return to the banks under the new programs is likely to limit banks’ willingness to provide these facilities.

99. The binding constraint to credit expansion is the lack of bankable opportunities, which becomes more severe as the economy continues to shrink. Banks generally have excess liquidity, with liquid assets amounting to almost 50 percent of total assets at end-2004. However, high interest rates, uncertain foreign exchange rates and availability all place strains on businesses, increasing credit risk. In the personal lending market, the rapid erosion of salaries by rampant inflation makes personal (retail) lending difficult, as individuals easily able to service a line of credit when granted may have no disposable income within a few months as salary increases lag the price increases in essential expenditures on food and shelter.

100. The fragmented foreign exchange market creates distortions and perverse incentives. The crackdown by the RBZ since 2004 is said to have resulted in banks and other regulated financial institutions ceasing to trade in the parallel market. Individuals and businesses will not willingly lose the difference between the auction rate and parallel market rate, so forced surrender requirements and vigorous enforcement primarily serve to drive the transactions outside the regulated financial sector or offshore.

101. Despite holding large portions of their assets in liquid investments, banks face severe challenges in managing their day to day liquidity position. In addition to the high statutory reserve requirements, an even more punitive measure is the sweeping of banks’ accounts with the RBZ at the close of business each day, with excess liquidity applied to the compulsory purchase of two year zero-coupon 17 percent special treasury bills.57 While serving to encourage interbank activity, this can result in severe penalties for banks unable to manage their excess reserve position to zero each day since the excess is swept into below market-rate instruments, while any shortfall must be covered through borrowing from the RBZ at the overnight rates.

102. Spreads between lending and deposit rates are inflated by the very high statutory reserve ratios. This increases the cost of borrowing, further dampening growth, and depresses the remuneration on deposits, providing a disincentive for savings. For banks making advances under concessional rate financing, the impact of the reserve requirements is mitigated because the RBZ provides zero interest advances to banks which are then on-lent. The RBZ considers these facilities to be funded from statutory reserves. Despite this, about 17 percent of bank assets are non-earning due to the reserve requirements, and a further 13 percent are in low yielding concessional rate loans, and a further portion is held in below-market compulsory purchased T-bills. This contributes to high lending rates and low deposit rates because the margin earned on about half the balance sheet has to cover non-interest expenses, the cost of unremunerated and below market rate assets, and provide a profit margin.

E. Banking Sector Soundness and Resilience

103. Given the measures taken by the RBZ, at present, the banking sector appears broadly sound and the quality of supervision generally adequate.58 There are still some weak banks in the system although they are small and not of systemic importance. Further, these weak banks are under close scrutiny by the RBZ which has since 2004 taken more decisive action to address the problem banks. The quality of supervision has been enhanced through staff recruitment and ongoing training to enhance capacity. More importantly, decisive supervisory action has been taken to deal with identified problem banks, which is a marked improvement over the practices of regulatory forbearance evident prior to 2004.

104. The remaining banks in the system have shown remarkable resilience in the face of a difficult macroeconomic environment. As a coping strategy, there has been an increasing preference for liquid low-risk assets evident in the noticeable shift towards securities (mainly treasury bills and investments) which constituted 25 percent of total assets at end-March 2005, up from 19 percent at end-2003 (Appendix 3).

105. Consequently, balance sheet growth has not resulted in a corresponding growth in loans. Although banking sector assets have grown by 50 percent in real terms between end-2003 and end-2004, loans have increased by only 20 percent in real terms.59 The increase in loans has largely been driven by the subsidized credit available through the Productive Sector Finance Facility (PSF), as there are few businesses able to sustain the high interest rates.60

106. Reported asset quality has deteriorated significantly, but the evident decline is in part attributable to improved supervisory capacity and more accurate reporting by banks. A decline in asset quality is not unexpected given the adverse macroeconomic conditions. The full impact of high interest rates has been mitigated for many borrowers by the PSF loans, which has lessened the deterioration in asset quality that might otherwise have occurred. Further, the increase in adversely classified loans from about 4 percent at end-2003 to 23 percent at end 2004 likely overstates the decline in asset quality. The figure from end-2003 was almost certainly much larger than reported by many banks, while the 2004 figure is likely much closer to a true picture as a result of more stringent supervision by the RBZ.

107. Banks profitability increased marginally despite the pressures on asset quality. This reflects large spreads, increased income from investments in government securities and cost minimization through retrenchments and streamlining operations in addition to the ongoing emphasis on funding with zero-cost demand deposits.61 Depositors continue to keep funds in the banks in spite of the limited returns due to the transactions demand for money in a high inflation environment and the absence of alternatives. The return on assets for commercial banks increased from 6.1 percent at end-2003 to 9.7 percent at end-2004. The return on equity was 125.4 percent at end-2004 but this remained below the rate of inflation.62

108. Loans are largely concentrated in the agriculture, distribution, and manufacturing sectors (Table 3). The exposure to the agricultural sector doubled from 11 percent at end-2003 to 21.4 percent at end-2004, largely due to the increased PSF loans causing a re-allocation from the distribution and services sector to the agriculture sector.

Table 3.Zimbabwe Financial Soundness Indicators, 1999-2004

(In percent, unless otherwise indicated 1/)

199920002001200220032004
Capital adequacy
Capital to risk-weighted assets15.318.322.416.215.034.4
Tier 1 capital to risk-weighted assets11.916.912.17.112.433.4
Capital to total assets6.09.510.48.07.512.1
Asset quality
NPLs to gross loans14.118.213.77.94.223.2
Total provisions to NPLs38.945.450.070.575.548.6
NPLs net of specific provisions to capital48.245.535.710.114.938.2
Loan concentration
Agriculture15.814.512.811.210.921.4
Construction1.54.31.92.33.12.2
Communication1.60.73.01.30.72.5
Distribution17.416.527.823.822.015.3
Finance & investments3.112.110.85.01.70.4
Financial Organizations2.77.41.66.82.10.3
Manufacturing17.614.020.620.919.120.6
Mining7.29.74.42.56.09.5
Services19.911.36.714.018.715.1
Transportation3.33.42.33.32.33.1
Individuals8.75.66.57.811.67.6
Others1.20.41.61.21.82.0
Earnings and profitability
Return on assets2.43.81.43.46.19.7
Return on equity50.143.118.762.7121.6125.8
Interest income to noninterest income482.0515.0230.0300.0482.7744.1
Net interest income to interest expenses89.0103.3351.1565.377.3176.6
Personnel expenses to gross income16.115.328.121.310.413.2
Liquidity
Liquid assets to total assets........18.147.4
Liquid assets to demand deposits..53.544.853.956.6164.2
Total (non-interbank) loans to customer deposits........74.165.0
FX deposits to total deposits........6.812.0
Sensitivity to market risk
Net open positions in FX to capital........-5.93.8
Memorandum Item
Inflation (end of period)56.955.2112.1198.9598.7132.7
Source: RBZ

Based on commercial banks only which account for about 80 percent of total banking sector assets.

Source: RBZ

Based on commercial banks only which account for about 80 percent of total banking sector assets.

109. The banking sector appears well-capitalized with a capital adequacy ratio (CAR) of 34 percent at end-2004 compared with 15 percent at end-2003. The considerable increase reflects increased retained earnings and capital injections to meet the higher minimum capital requirements introduced in January 2004 and the large holdings of zero-risk-weighted treasury bills. However, the reported figures need to be treated somewhat cautiously because despite the improvement in regulatory reporting, there may still be some under-provisioning, leading to the overstating of CARs. Reported CARs would decline if there were a significant shift in banks’ portfolios from zero-risk weighted government securities to loans to the private sector.

110. Liquidity ratios increased considerably and remained significantly above the prudential levels of 10 percent. These increased from 18.1 percent end-2003 to 47 percent of total assets at end-2004 largely reflecting the shift towards the short term investments in order to match the funding base as the public is increasingly investing short-term in response to continuing high inflation. A substantial proportion of short-term assets comprise government securities whose actual liquidity may be limited by the absence of secondary markets particularly in a time of distress.

111. The foreign exchange risk is minimal given the severe shortage of foreign exchange in the economy. Banking sector foreign currency denominated assets and liabilities estimated at 0.2 percent of total assets at end-March 2005 are negligible. Banks do not extend foreign currency loans, consequently there are no concerns about whether foreign currency borrowers are unhedged.

112. Stress testing indicates limited vulnerability to extreme but plausible shocks to the system (Box 2).63 The stress testing considers only the direct effects of the shocks. In particular, the second-round effects of the interest rate increase and devaluation on asset quality are not considered. However, given the limited size of banks’ loan portfolio, the prevalence of subsidized credit, and the self-liquidating nature of many working capital loans, the second-round impacts would not be as significant as might otherwise be expected. In line with the key assumption that government securities are low-risk (Footnote 4), sovereign risk was not assessed. Sovereign default could trigger a banking crisis.

Box 2.Stress Tests

Stress tests were conducted to assess the potential vulnerabilities in the Zimbabwean banking system. Overall, the results indicate that the banks are resilient to direct economic shocks (Appendix 4). Using end-December 2004 banks’ data, and based on changes in the macroeconomic environment in Zimbabwe assuming the adoption of a policy package, stress tests were conducted to assess credit risk, foreign exchange risk and interest rate risk on the data of commercial banks, merchant banks, building societies, finance houses and discount houses.

Extra provisioning to provide 100 percent coverage of reported non-performing loans (NPLs) has a minimal impact on banks’ capital adequacy. Although it results in seven banks with CAR less than the statutory 10 percent, these constitute only 8 percent of the banking sector assets. Further, given that before the shock, six banks already had CARs less than 10 percent, the effect of the shock is extremely limited as only one extra small bank with banking assets comprising about 1.23 percent of total banking assets has its ratios fall below 10 percent. Three small banks become insolvent but these constitute less than 2 percent of total banking sector assets.

Credit risk is minimal as evidenced by the effect of the increase in NPLs of about 12 percent. The PSF subsidized credit program expires at end-June 2005 and assuming that the outstanding PSF loans as at end-May 2005 become nonperforming resulting in a increase in NPLs of 12.17 percent, the results show that the impact on the CAR would be very small and similar to the effect of increasing provisioning to adequate levels. The increase in NPLs leads to an increase in provisioning for the NPLs of about 40 percent which is similar to the increased provisioning to bring it up to required levels.

Devaluation has limited effect on the banking sector. Direct exchange risk is limited given that the banking sector on average has a long net open position in foreign exchange as at December 2004. Accordingly, a 100 percent devaluation only has a limited effect on the banks with only one extra bank constituting about 3 percent of total assets becoming undercapitalized compared to the situation before the shock.

An interest rate increase initially benefits the Zimbabwean banking sector. Demand deposits in Zimbabwe attract a zero interest rate while most interest-bearing liabilities are very short term (three months or less) in view of the high inflation environment. On the asset side, 77 percent of total credits are short term (three months or less). Therefore, applying the interest rate increase on the three months cumulative gap between assets and liabilities after having accounted for the zero-interest demand deposits, only 5 banks comprising 3.20 percent of the banking sector assets become undercapitalized. Indeed, one bank with a market share of 3.49 percent benefits from the interest rate increase because of the increased net income since the assets greatly exceed their liabilities in the three-month window. A further increase in interest rates to 25 percent is even more beneficial for the banking system as only 4 banks (less than the 5 banks under the 10 percent interest rate increase assumption) with assets worth 2.10 percent of total assets are undercapitalized. These short term benefits will, however, be partially offset by the second round effects of deterioration in asset quality due to higher interest rates.

The combination scenario of 100 percent depreciation and a 10 percentage point increase in the interest rate does not pose a significant threat to the soundness of the banking sector. The test captures only direct effects and the results show a small increase in undercapitalized banks to 6 comprising 8.50 percent of the total banking sector assets. Overall, and compared to the starting point, the effect is rather minimal given that before the shock already 6 banks representing almost 7 percent of banking sector assets are already undercapitalized.

113. In addition, the risks to the banking system have been reduced through enhanced supervision leading to the exit of weak banks, and the improved approaches to corporate governance and risk management although these will take time to be fully effective. New prudential guidelines were issued in 2004 to establish minimum standards for corporate governance, internal audit, and the relationship between the supervisor and external auditors. These new guidelines have already had a substantial effect in the banking industry, with the reconstitution of the boards and/or senior management of a number of banks and while on-site examinations in 2004 did identify some progress within the banking sector in implementing these improved approaches, they will take time to be fully effective.

F. Deposit Insurance

114. The establishment of the Deposit Protection Board (DPB) in July 2003 was ill-timed given the absence of the basic pre-conditions for deposit insurance. This has been reflected in the minimal role played to date by the DPF in problem bank resolution. Nonetheless, its first premia were received in December 2003. It is chaired by the governor of the RBZ, and two deputy governors are also ex officio board members. The other three board members are appointed by the governor. This dominance of the DPB by the RBZ raises potential conflict of interest issues, as fiduciary responsibility to minimize costs to the DPB could, in some circumstances, conflict with RBZ objectives.

115. The DPB incorporates some elements of best practices, most notably compulsory membership for all licensed deposit-taking institutions to avoid adverse selection, and partial coverage to mitigate moral hazard. The insurance coverage was increased from Z$ 200,000 (about US$20) to Z$ 5 million (about US$500) in April 2005. Currently, a flat premium of 0.00738 percent of average deposits is applied to all financial institutions but the DPB is considering the merits of introducing a risk-adjusted premium in order to moderate the ‘subsidy’ provided by the strong to the weaker institutions. In practice, however, it is difficult to make an objective assessment of the size of the risk premium needed to have an impact on bank behavior.

116. The capital fund of the DPB is currently inadequate to meet insured depositors’ claims should a large bank fail. The relatively small size of the DPB largely reflects the fact that it is less than two years old. The DPB is empowered under section 68 of the banking act to borrow money for the purposes of the fund, and while there is no written agreement, the DPB believes that in time of need funds could be borrowed from the RBZ and/or government.

117. One of the challenges for the DPB is to keep its coverage meaningful in a high inflation environment while simultaneously ensuring the accumulation of an adequate fund. At end December-2004, the capital fund was worth Z$ 42 billion or 2 percent of total deposits of the largest bank. Although the capital fund increased to about 79 billion at end-May 2005, its exposure has increased significantly to about Z$ 246 billion given the higher coverage levels since April 2005.

118. The DPB’s current effectiveness is limited on two counts. First, the consensus in the financial industry is that customers have little or no awareness of deposit insurance, and thus the fund cannot perform its expected function of assisting smaller banks in competing against those banks perceived to be too big to fail. Second, even if consumers are aware, the rapid erosion through inflation of the real value of the insured limit, coupled with the current need for depositors to execute claims before a notary, can result in costs to the depositor of more than the value of the deposit. This view is substantiated by the failure of the majority of depositors to claim in the two institutions to date in which the DPB has been involved.

119. The DPB fund is a ‘paybox’ in the sense that it is only mandated to make payments to depositors of banks in liquidation. To date it has made payments to depositors of Century Discount House (Z$ 33.9 million representing 45 percent of total depositors) while ongoing payment is being made to Rapid Discount House (so far Z$ 64 million representing 30 percent of total depositors has been paid). The DPB should have the express legal capacity to make payments for transactions such as purchase and assumption agreements when these result in a lesser cost to the fund than paying depositors in liquidation.

120. The DPB plans a review of its legal framework, including amending the structure of the Board, and to allow DPB to participate in bank resolution and play a role as a liquidator. Further, it is expected that once the memorandum of understanding (MOU) between DPB and RBZ is operational, there will be increased information sharing and coordinated bank supervisory activities particularly in the case of problem banks. Further, its effectiveness will be enhanced by increased publicity.

G. Conclusions

121. Removal of weak banks from the system, strengthened supervision and improved governance has contributed to the enhanced resiliency of the Zimbabwe banking system. Most banks are coping surprisingly well with the difficult environment, although the ability to intermediate resources to support economic growth has been weakened. Further problems in the banking sector cannot be ruled out, but a continuation of current government policies is more likely to result in the slow wasting away of a still vibrant financial sector than it is to trigger a systemic crisis.

122. Three conclusions emerge from the foregoing analysis. First, the myriad of producer and credit subsidies which do not have a prudential foundation increase the administrative burden on borrowers and banks, and require greater policing activities by the RBZ, diverting scarce resources from more productive activities. Elimination of subsidized credit, introduction of a market determined exchange rate, and removal of restrictions without a prudential foundation would enable the banking system to more effectively intermediate to support economic growth.

123. Second, provision of full supervision powers to the RBZ has been crucial to the strengthening of the financial system through decisive action to remove weak institutions. The recent amendments to the banking act to require the RBZ to consult with the Minister of Finance on issues of licensing and intrusive supervisory action is a step backward. The RBZ should retain all supervisory powers, including licensing and the ability to intervene in weak institutions.

124. Third, it is important that erroneous conclusions not be drawn from the recent experience with curatorship, bridge banks and the use of public funds for bank resolution. The RBZ should instead develop contingency plans based on quicker intervention, faster resolution, and preservation of only the viable portions of failing banks, which will require a review of the deposit insurance scheme legal framework to allow the DPB to participate in bank resolutions such as purchase and assumption transactions. The true costs of the current approach have been obscured by high inflation, and depositors and other creditors would be better served through faster and less disruptive resolution of problem banks.

Appendix 1
Zimbabwe Deposit-Taking Institutions(end-March 2005)
PublicPrivateForeignTotal AssetsTotal DepositsMarket
(Z$ billion)Share
Commercial Banks
AGRIBANK100.00.00.01,038.5292.93.9
BARCLAYS0.0100.067.73,021.91,538.911.4
CBZ17.282.840.83,960.11,996.114.9
FBC0.0100.00.0654.5300.12.5
KINGDOM0.0100.00.0627.2456.02.4
MBCA0.0100.078.5822.6119.33.1
METROPOLITAN0.0100.00.0274.2107.51.0
NMB0.0100.00.0741.5222.92.8
STANBIC0.0100.0100.02,391.9884.69.0
STANCHART0.0100.0100.05,620.42,274.121.2
ZABG70.030.00.0685.237.52.6
ZIMBANK75.824.20.02,388.81,153.49.0
Merchant Banks
ABC Zimbabwe0.0100.00.0442.389.91.7
GENESIS0.0100.00.0175.01.00.7
INTERFIN5.095.00.0421.2280.61.6
RENAISSANCE0.0100.00.0401.8117.41.5
Building Societies
BEVERLEY0.0100.0100.0456.3304.71.7
CABS0.0100.0100.0993.3426.73.7
INTERMARKET0.0100.00.0193.5113.00.7
ZBS40.060.00.065.549.70.2
Finance Houses
SUNPOL......22.39.30.1
TRUSTFIN......29.013.90.1
ABC0.0100.00.0353.7303.11.3
ZDBFS76.423.615.852.241.80.2
ABC0.0100.00.067.819.20.3
HIGHVELD0.0100.00.0137.40.00.5
DCZ0.0100.00.070.90.20.3
NDH16.383.70.032.30.00.1
PREMIER0.0100.00.0166.41.00.6
TETRAD0.0100.00.0236.70.00.9
Under Curatorship
CFX Merchant Bank01000......
CFX Bank01000......
Time Bank01000......
Intermarket Banking Corp01000......
Intermarket Discount House01000......
Under Liquidation......
Rapid Discount House01000......
Source: Reserve Bank of Zimbabwe.
Source: Reserve Bank of Zimbabwe.
Appendix 2
Banks Placed in Curatorship in 2004
Date of

Curatorship
Resolution/ Current StatusTotal deposits

(billions, Sep 04)
Market share

(percent of commercial

bank deposits)
Barbican Bank Ltd.15 Mar 04Incorporated into ZABG from end-January 200549.40.9
CFX Bank Limited17 Dec 04Ongoing negotiations with potential new investors127.62.4
CFX Merchant Bank17 Dec 04Ongoing negotiations with potential new investors23.90.4
Intermarket Banking Corporation Ltd.12 Mar 04Pursuing merger with Finhold Group11.00.2
Intermarket Building Society Ltd.12 Mar 04Pursuing merger with Finhold Group75.51.4
Intermarket Discount House Ltd.12 Mar 04Pursuing merger with Finhold Groupn.a.n.a.
Royal Bank Zimbabwe Ltd.4 Aug 04Incorporated into ZABG from end-January 200590.61.7
Time Bank of Zimbabwe Ltd.27 Oct 04Legal action against RBZ has stayed action112.92.1
Trust Bank Corporation Ltd.23 Sep 04Incorporated into ZABG from end-January 2005157.53.0
Source: Reserve Bank of Zimbabwe.
Source: Reserve Bank of Zimbabwe.
Appendix 3
Zimbabwe Balance Sheet Structure(end-March 2005)
All Banks 1/FoBs 2/Banks by CAMEL rating
123 - 5
Percentage of total assets 1/
Cash2.52.22.51.85.3
Securities and Investments25.223.122.728.920.6
Of which Tbills23.720.021.327.120.3
Statutory Reserves17.423.419.815.08.0
Foreign Currency assets0.20.10.10.30.5
Loans24.518.418.430.535.8
Others 3/30.232.736.523.429.9
Percentage of total liabilities & capital
Total deposits43.040.640.142.950.9
of which Demand deposits22.330.726.017.714.9
of which Savings deposits19.09.113.225.122.0
Capital11.313.113.413.611.7
Foreign currency deposits3.14.33.82.42.0
Borrowing from RBZ1.00.30.71.60.0
Borrowing from other FI1.00.00.01.26.1
Other liabilities28.824.224.435.018.0
Others14.921.821.35.713.3
Percent
FX loans -Fx deposits0000
Source: Fund Staff computations from RBZ data

Total assets and all banks information exclude ZABG which has not yet been rated.

Foreign-owned banks

This mainly constitutes interbank loans and contingency assets.

Source: Fund Staff computations from RBZ data

Total assets and all banks information exclude ZABG which has not yet been rated.

Foreign-owned banks

This mainly constitutes interbank loans and contingency assets.

Appendix 4
Stress Tests
Groups of BanksBefore shockProvisioning 1/NPLs increase

12.17%
Devaluation

100%
Interest

rate

10%
Interest rate

25%
Combined
All banks31.3929.8029.2232.1931.2230.9732.02
Commercial banks30.9829.5429.0032.1730.7530.4031.93
Merchant banks14.8710.829.0913.3914.7214.5013.24
Building societies81.7581.6481.6381.7514.7214.5082.72
Finance houses33.7724.9222.8828.7434.0034.3528.97
Discount houses-4.84-4.84-4.84-4.84-5.27-5.91-5.27
Banks with CAR<10%6777546
Their share of assets6.697.927.929.953.202.108.50
Banks with CAR<01331121
Their share of assets0.261.701.700.260.260.340.12
Source: Reserve Bank of Zimbabwe and Fund Staff estimates

Involves bringing provisioning up to required levels.

Source: Reserve Bank of Zimbabwe and Fund Staff estimates

Involves bringing provisioning up to required levels.

STATISTICAL APPENDIX
Table 1.Zimbabwe: Expenditure on GDP, 1998-2003
199819992000200120022003
(In millions of Zimbabwe dollars)
Consumption116,320189,765314,880701,2911,910,2006,334,993
Private93,647158,797269,035636,7531,824,4916,214,782
Central government22,67330,96845,84564,53885,709120,211
Gross fixed capital formation29,59330,92238,43251,75792,992174,659
Government2,4583,1992,30011,60025,200107,700
Private27,13527,72336,13240,15767,79266,959
Change in stocks2144,0668,941-12,201-242,074-892,526
Gross investment29,80734,98847,37339,557-149,081-717,867
Net exports of goods and nonfactor services-2,4823,630-880-31,634-62,939-98,370
Exports62,332105,877118,151105,23593,02284,118
Imports-64,814-102,246-119,031-136,868-155,961-182,488
GDP (at market prices)143,645228,384361,373709,2141,698,1805,518,757
Net factor income from abroad-9,155-9,431-11,286-11,934-8,930-7,068
Factor income received from abroad4141,4911,268755799863
Factor income paid abroad-9,569-10,922-12,554-12,690-9,729-7,931
Gross national income134,490218,952350,087697,2801,689,2515,511,689
(In percent of GDP)
National savings, excluding grants13.412.510.1-0.6-13.1-14.9
Government-1.2-5.7-18.1-6.6-1.22.1
Private14.618.2
Gross fixed capital formation20.613.510.68.28.28.2
Government1.71.40.61.61.52.0
Private18.912.110.05.74.01.2
Change in stocks0.11.82.5-1.7-14.3-16.2
Gross investment20.815.313.16.5-6.1-8.0
Source: Central Statistical Office.
Source: Central Statistical Office.
Table 2.Zimbabwe: Gross Domestic Product, 1998-2004(Percent change at constant 1990 prices)
1998199920002001200220032004
Agriculture, hunting, fishing, and forestry2.33.63.2-3.9-22.7-1.0-2.9
Mining and quarrying8.4-7.0-6.9-13.52.2-28.724.9
Manufacturing-3.4-4.5-11.5-5.4-13.2-13.8-9.5
Electricity and water-4.37.6-1.010.36.21.5-1.5
Construction6.0-11.1-15.0-35.2-41.0-15.5-4.5
Finance and insurance6.2-4.50.8-1.221.2-23.7-3.0
Real estate5.45.14.94.23.92.2-5.0
Distribution, hotels, and restaurants0.80.4-8.8-5.2-4.5-30.8-4.3
Transport and communications-11.0-3.7-6.3-5.5-1.0-8.1-5.5
Public administration-3.0-4.8-6.24.72.02.1-4.5
Education6.8-8.03.75.91.00.7-4.0
Health6.614.5-7.617.8-13.01.4-5.5
Domestic services-1.1-6.3-5.05.72.50.4-2.5
Other services2.27.4-2.1-2.71.81.8-5.5
Less: imputed bank service charges37.413.913.90.0-24.8-25.6-15.5
GDP (at factor cost)-0.8-2.1-5.4-3.4-4.8-10.8-3.4
Net other taxes on production39.4-16.2-17.1-23.7-43.6-71.6-25.0
GDP at basic prices-0.7-2.2-6.1-3.5-4.9-10.9-3.5
Net taxes on products10.8-14.7-24.06.70.6-5.4-10.5
GDP at market prices0.5-3.6-7.3-2.7-4.4-10.4-4.2
Memorandum item:
Real GDP (in millions of 1990 Zimbabwe dollars)25,52024,49622,72022,11321,14718,95518,168
Sources: Central Statistical Office, 1998-2003; and IMF staff estimates, 2004
Sources: Central Statistical Office, 1998-2003; and IMF staff estimates, 2004
Table 3.Zimbabwe: Agricultural Crop Production, 1998-20041/(In thousands of tons)
1998199920002001200220032004

Est.
Commercial farms2/
Tobacco (flue cured)2231962402041648355
Maize5686001 209482305341318
Cotton3/1561541454831213
Sugarcane (Total)570585560515554501536
Wheat2432852503141541120
Groundnuts542791659141134
Tea212322623
Soybeans11495141164773466
Coffee (Total)118879910
Sunflower seeds794183
Sorghum21417419186236
Communal lands4/
Tobacco (flue cured)335491113
Maize623944939994300718832
Cotton3/118149195234159207287
Wheat2110593845
Groundnuts3871112156001
Tea100162
Soybeans13311776
Sunflower seeds107284917
Sorghum16422941496
Total production
Tobacco (flue cured)2261992452081739468
Maize1,1911,5442,1481,4766051,0591150
Cotton3/274303340282190228290
Sugarcane570585560515554501536
Wheat2452862513142134965
Groundnuts4311319117259141135
Tea2223222225
Soybeans11598144175844172
Coffee118879910
Sunflower seeds817163251720
Sorghum378310360227142
Sources: Central Statistical Office; Ministry of Economic Development; and IMF staff estimates, 2004.

Crop season ending in year indicated.

Large- and small-scale commercial farms.

Includes deltapine and delmac cotton.

Communal lands and resettlement areas.

Sources: Central Statistical Office; Ministry of Economic Development; and IMF staff estimates, 2004.

Crop season ending in year indicated.

Large- and small-scale commercial farms.

Includes deltapine and delmac cotton.

Communal lands and resettlement areas.

Table 4.Zimbabwe: Prices of Marketed Agricultural Crops, 1997/98-2003/041/(Unit values in thousands of Zimbabwe dollars per metric ton)
1997/981998/991999/20002000/012001/022002/032003/04
Maize1.22.44.25.415.031.9300.0
Cotton7.18.716.615.931.1107.41900.0
Wheat3.13.75.57.425.070.0776.0
Tobacco; flue cured26.634.866.283.8174.7361.38614.0
Tobacco; burley20.324.850.736.992.0205.84336.0
Soybeans2.95.06.59.417.070.01000.0
Sorghum2.21.03.03.15.528.0300.0
Groundnuts (unshelled)4.04.07.09.622.045.0500.0
Coffee13.860.080.080.080.0350.01200.0
Sunflower seeds1.52.36.05.614.040.0350.0
Source: Central Statistical Office.

Marketing years run from April 1 to March 31.

Source: Central Statistical Office.

Marketing years run from April 1 to March 31.

Table 5.Zimbabwe: Area Under Cultivation for Major Crops, 1998-20041/(In hectares)
1998199920002001200220032004

Est.
Maize1,181,2071,477,9901,373,1171,239,9881,327,8541,352,3681,493,810
Cotton236,287310,534282,469384,574401,897195,077331,716
Tobacco79,29578,71376,20066,69871,88047,21355,584
Flue cured73,53472,65470,30661,18968,23045,712
Burley5,7616,0595,8945,5093,6501,501
Soybeans60,29052,93160,65064,00951,28225,39049,572
Sorghum126,039143,912116,248110,13881,513128,530227,768
Groundnuts (unshelled)178,555132,117175,773275,036258,610105,052133,339
Coffee2/6,7415,9125,2155,5163,792
Sugarcane2/37,36039,45939,22439,68037,414
Wheat2/41,94352,59247,79642,11732,90016,400
Sources: Central Statistical Office; and Zimbabwe Grain Producers’ Association.

Crop season ending in year indicated.

Large-scale commercial farms only.

Sources: Central Statistical Office; and Zimbabwe Grain Producers’ Association.

Crop season ending in year indicated.

Large-scale commercial farms only.

Table 6.Zimbabwe: Volume and Value of Livestock Slaughtering and Milk Production, 1998-20041/
1998199920002001200220032004
(Volume in thousands)
Cattle slaughtering369347382347329208185
Sheep slaughtering2224202132137
Pig slaughtering224199219201177114109
Goat slaughtering3625211014105
(Whole-milk tons)
Milk production165,803158,170144,973136,318116,58981,91389,565
(Value in millions of Zimbabwe dollars)
Total slaughtering2,1904,1956,5337,44613,12963,302
Cattle1,9013,7145,8356,20410,03548,4191,110,000
Sheep811293810229
Pigs2744636531,1932,96614,83965,649
Goats7716112615
Milk production6201,2481,8522,9056,9029,029160,000
Source: Central Statistical Office.

Figures for slaughtering do not include the 3rd & 4th quarter slaughterings for butchers & grading centres.

Source: Central Statistical Office.

Figures for slaughtering do not include the 3rd & 4th quarter slaughterings for butchers & grading centres.

Table 7.Zimbabwe: Livestock in Communal and Commercial Farming Areas, 1998-2003(In thousands)
199819992000200120022003
Cattle4,9535,3165,2265,5414,8175,297
Communal lands3,5883,9753,9824,3984,0554,936
Commercial farms1,3651,3411,2441,143762361
Beef cattle1,2751,2591,1691,071710
Dairy cattle9082757252
Sheep343310293546532515
Communal lands274250238493498487
Commercial farms696055533428
Goats4,6454,3633,8483,4263,1703,276
Communal lands4,6164,3393,8283,4073,1563,248
Commercial farms292420191428
Pigs311244250277243419
Communal lands197140160161145157
Commercial farms1141049011698262
Sources: Central Statistical Office; and Veterinary Services.
Sources: Central Statistical Office; and Veterinary Services.
Table 8.Zimbabwe: Volume of Manufacturing Output, 1998-2004
1998199920002001200220032004

Est.
(Volume indices: period averages, 1990 = 100)
Foodstuffs and stock feeds83.784.273.472.465.248.548.7
Drinks and tobacco111.196.2114.086.761.862.050.2
Textiles and cotton ginning79.187.372.868.949.432.039.8
Clothing and footwear114.6125.7120.8123.0108.4104.496.2
Wood and furniture342.8285.0231.1220.0205.8162.9143.5
Paper, printing, and publishing102.794.174.769.569.561.257.5
Chemical and petroleum products120.3107.475.975.279.168.066.7
Non-metallic mineral products125.7115.4112.1120.585.560.056.8
Metals and metal products77.582.882.973.565.865.451.2
Transport equipment101.169.252.043.741.238.638.9
Other manufacturing69.264.148.645.052.133.437.8
Overall index106.699.993.386.972.664.058.0
(Percent change)
Foodstuffs and stock feeds-1.30.6-12.8-1.3-9.9-25.60.4
Drinks and tobacco13.0-13.418.5-24.0-28.70.3-19.0
Textiles and cotton ginning7.010.4-16.6-5.4-28.3-35.224.4
Clothing and footwear7.99.6-3.91.8-11.9-3.7-7.9
Wood and furniture-2.0-16.9-18.9-4.8-6.5-20.8-11.9
Paper, printing, and publishing-4.4-8.4-20.7-6.90.0-11.9-6.0
Chemical and petroleum products-5.0-10.7-29.3-1.05.2-14.0-1.9
Non-metallic mineral products10.1-8.2-2.87.4-29.0-29.8-5.3
Metals and metal products-16.46.90.1-11.3-10.5-0.6-21.7
Transport equipment-27.6-31.5-24.9-15.9-5.7-6.30.8
Other manufacturing-14.4-7.3-24.2-7.415.8-35.913.2
Overall index-1.3-6.3-6.6-6.8-16.5-11.8-9.4
Source: Central Statistical Office.
Source: Central Statistical Office.
Table 9.Zimbabwe: Mineral Production,1998-2004
1998199920002001200220032004

Est.
(In thousands of metric tonnes, unless otherwise indicated)
Volume of production
Gold (thousands of fine ounces)809872708560431400686
Platinum (kilograms)2,6853905044352,0114,2704,438
Nickel10,1739,5935,9673,9086,3139,5179,776
Coal5,4674,9773,9864,5113,9382,8722,476
Asbestos12388152119168147104
Chrome ore605653668723672637668
Iron ore372599438362272367229
Silver (thousands of fine ounces)531173122108925019
Cobalt (metric tons)9413179681057959
Black granite226124510379197190137
Other (index,1980=100) 1/
(Index, 1990=100)
Unit value index2/
Gold7421,1391,2951,5411,75960,960104,546
Platinum1,1147062,78718,09422,72341,51843,151
Nickel5011,0071,7692,84110,04345,44546,682
Coal6671,1052,0723,1216,13112,85611,083
Asbestos1,1691,8492,0242,2532,2573065821,690
Copper6689547111,1966,24116,25414,448
Chrome ore4217071,1012,0015,78923,43324,574
Iron ore4466931,0182,8184,4256,0053,747
Silver4521,6671,8251,9702,07323,2018,753
Cobalt1,7251,7911,5875,79425,7676,2044,660
Memorandum item:
U.S. dollar; period average)
Sources: Ministry of Finance; Central Statistical Office; and IMF, International Financial Statistics

Includes diamonds, other precious stones, phosphate, tantalite, magnesite, limestone, and lithium.

Unit value indices are estimates.

Sources: Ministry of Finance; Central Statistical Office; and IMF, International Financial Statistics

Includes diamonds, other precious stones, phosphate, tantalite, magnesite, limestone, and lithium.

Unit value indices are estimates.

Table 10.Zimbabwe: Construction and Retail Trade, 1998-2004
1998199920002001200220032004
Jan.-Mar.
(In millions of Zimbabwe dollars, unless otherwise indicated)
Construction indicators
Total building plans approved1/1,9102,9083,6193,6369,1751,053
Municipal building plans approved4,2084,3324,5394,4084,5213,366907
Low-cost houses and flats (in units)2,5031,8991,2505204203526
High-cost houses and flats (in units)1,7052,4333,2893,8884,1013,331881
Work done by private and public contractors
Public7523251392985351313
Private1,7411,755
Of which: public sector284360
Retail trade value index, monthly average 1980 = 1001,37819802210
(Percent change)1144
Source: Central Statistical Office

Includes additions and alterations.

Source: Central Statistical Office

Includes additions and alterations.

Table 11.Zimbabwe: Electrical Energy Produced and Distributed, 1998-2004(In millions of kilowatt-hours)
1998199920002001200220032004
Total power distributed11,62012,40812,20612,20612,58312,23512,221
From central grid1/11,51512,29012,10212,16412,58312,23512,221
Noninterconnected thermal station10211410442000
Other (net)2/3430000
Power generated domestically6,6777,2087,0997,9268,5878,7999,719
From South Kariba3/1,9252,9503,2602,9983,8245,3595,521
Thermal stations4,6504,1403,7354,9284,7633,4394,198
Noninterconnected thermal station10211810442
Net imports4,9365,2045,1064,1853,9963,4362,502
Source: Central Statistical Office.

Drawings from the grid of the Central African Power Corporation.

Net imports from noninterconnected sources.

Power generated from South Kariba is Zimbabwe’s share but it is fed into the Central African Power Corporation Grid.

Source: Central Statistical Office.

Drawings from the grid of the Central African Power Corporation.

Net imports from noninterconnected sources.

Power generated from South Kariba is Zimbabwe’s share but it is fed into the Central African Power Corporation Grid.

Table 12.Zimbabwe: Petroleum Products, 1998-2005
19981999200020012002200320042005

April
Retail price (Zimbabwe cents per liter; end of period)1/
Premium petrol9671,8684,3807,4477,447175,000175,000175,000
Diesel8101,6813,9606,6396,639165,000165,000260,000
Aviation gas1,2141,8652,0262,0265,737247,800247,800165,000
Jet fuel (A1)7921,6693,1205,7035,703247,800247,800270,000
Liquefied petroleum gas (LPG)1,4002,4052,5662,55610,50010,50010,50011,940
Tax (Zimbabwe cents per liter; end of period)
Premium petrol1403469127307307305,8507,944
Diesel501883853853853855,8508,331
Aviation gas50505000000
Jet fuel (A1)50304000009,106
LPG10010010010054545,8500
Quantity imported (thousands of liters)1/
Premium petrol530,252709,469381,234473,310389,49415,4696,00028,429,515
Diesel956,4801,215,446632,828525,263681,92132,41228,77957,162,718
Aviation gas3,4334,513003009000
Jet fuel (A1)311,289305,840140,917120,72379,0134266,3621,506,591
LPG7,0717,0127551,0731,31700
Sources: National Oil Company of Zimbabwe; and Zimbabwean news sources.

Data for 2003, 2004 and 2005 is for government imports only. Data on retail prices and quantity imported by the private sector not available.

Sources: National Oil Company of Zimbabwe; and Zimbabwean news sources.

Data for 2003, 2004 and 2005 is for government imports only. Data on retail prices and quantity imported by the private sector not available.

Table 13.Zimbabwe: Consumer Price Index, 1998-2005
Weight19981999200020012002200320042005

May
(Index, 1995=100)
Food33.62503925591,1643,72527,39960,59287,013
Nonfood index66.43765921,1182,4676,35222,85854,81183,196
Beverages and tobacco16.02363966171,2155,55138,24684,806137,481
Clothing and footwear6.91642874371,1293,65222,83353,14273,258
Rent rates and power17.31882554107441,2535,70418,88634,819
Furniture and household goods7.52183395051,5323,77922,85837,63548,799
Medical care1.71813515391,0832,88419,29854,01672,687
Transport and communication6.62554198991,9223,46041,889127,238157,574
Recreation and entertainment1.22223866822,1785,28029,36163,43991,085
Education4.52072844108501,8779,87035,89277,808
Miscellaneous4.72333284741,2473,18017,53633,20149,032
Total index100.02263555501,1673,49024,38456,75384,478
(Year-on-year percent change)1/
Food62.956.842.9108.0220.1635.6121.1118.7
Beverages and tobacco66.765.355.597.0357.1589.0139.8160.6
Clothing and footwear27.975.252.4158.5223.5525.2121.7190.0
Rent rates and power11.235.860.481.768.4355.1132.7130.2
Furniture and household goods52.155.548.9203.6146.7504.9231.1150.4
Medical care15.694.553.2101.1166.3569.164.674.7
Transport and communication62.364.4114.8113.780.01,110.6179.9176.8
Recreation and entertainment46.473.576.7219.6142.4456.1203.8196.6
Education22.436.744.7107.1120.9425.9116.174.8
Miscellaneous53.140.744.5163.1155.0451.4263.6195.1
Total index46.756.955.2112.1198.9598.7132.7144.4
Source: Central Statistical Office.

December over December.

Source: Central Statistical Office.

December over December.

Table 14.Zimbabwe: Consumer Price Index. December 2003-May 2005
WeightDec-03Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04Dec-04Jan-05Feb-05Mar-05Apr-05May-05
(Index, 1995=100)
Food33.627,39931,11034,50936,24737,60639,79245,14947,95749,42652,62455,53258,50060,59265,54769,60774,25879,92787,013
Nonfood index66.422,85825,99726,78828,50030,08431,92733,99337,96040,48742,72148,26252,68154,81164,32365,32267,20972,05383,196
Beverages and tobacco16.038,24640,84741,99042,30244,63047,40350,20154,37059,35664,31071,88782,41184,80698,190101,479104,388114,918137,481
Clothing and footwear6.922,83326,37427,85429,07231,13031,83034,64836,93137,95240,12841,51550,05153,14254,53657,05660,76764,22173,258
Rent rates and power17.35,7049,0389,40613,13213,85513,90514,56414,83616,06515,37916,03216,33718,88627,44323,34523,39024,02134,819
Furniture and household goods7.522,85824,91026,05626,70927,35927,93029,50930,43632,44933,61435,07036,10237,63539,23440,88342,46344,72448,799
Medical care1.719,29823,00923,57523,91524,81326,26126,72227,86132,17847,16048,88152,89954,01656,93159,37962,13066,78972,687
Transport and communication6.641,88943,95142,57846,89651,25853,13558,38984,02087,09790,582122,475126,145127,238142,784144,673146,778153,841157,574
Recreation and entertainment1.229,36138,92741,44641,79343,25552,09651,51652,04154,79656,66655,15361,28263,43967,84769,32571,28385,79591,085
Education4.59,87015,83316,50116,80017,60926,36927,41928,36830,30031,48333,39934,51135,89265,05370,56771,64074,10977,808
Miscellaneous4.717,53619,84521,14121,67822,11622,66924,12425,85426,98827,57030,25631,67533,20135,26136,68438,99242,23149,032
Total index100.024,38427,71529,38231,10332,61134,57037,74141,31943,49046,04850,70554,63656,75364,73466,76269,57774,69984,478
(Year-on year-percent change)
Food635.6665.7689.4655.9563.5481.8430.6378.4320.4264.8210.8143.1121.1110.7101.7104.9112.5118.7
Nonfood index578.2599.1555.5544.2473.1429.8373.0353.5310.8243.7208.0152.8139.8147.4143.8135.8139.5160.6
Beverages and tobacco589.0575.4531.0510.8457.4395.7319.5293.4251.2232.4196.6128.3121.7140.4141.7146.8157.5190.0
Clothing and footwear525.2552.0525.7477.7448.9403.5339.1313.3265.1213.0156.5153.8132.7106.8104.8109.0106.3130.2
Rent rates and power355.1436.5438.4634.2463.2462.0451.2357.2304.0253.7234.5208.7231.1203.6148.278.173.4150.4
Furniture and household goods504.9533.8490.8466.0416.5366.4307.1231.1201.0117.094.173.464.657.556.959.063.574.7
Medical care569.1668.4661.9608.7522.8536.8500.4407.0435.2493.2440.6187.1179.9147.4151.9159.8169.2176.8
Transport and communication1,110.61,086.1904.9820.4626.9497.2499.4694.9695.8386.7323.5225.4203.8224.9239.8213.0200.1196.6
Recreation and entertainment456.1588.9548.1492.8395.5455.1446.4442.3408.5310.3231.5208.6116.174.367.370.698.374.8
Education425.9709.3652.8514.6514.3776.0712.1675.5664.5488.3422.4383.4263.6310.9327.6326.4320.9195.1
Miscellaneous451.4483.4468.0423.9406.8367.3302.4250.2213.3145.8122.9103.389.377.773.579.991.0116.3
Total index598.7622.8602.5583.7505.0448.8394.6362.9314.4251.5209.0149.3132.7133.6127.2123.7129.1144.4
(Monthly percent change)
Food13.913.510.95.03.75.813.56.23.16.55.55.33.68.26.26.77.68.9
Nonfood index9.713.73.06.45.66.16.511.76.75.513.09.24.017.41.62.97.215.5
Beverages and tobacco6.06.82.80.75.56.25.98.39.28.311.814.62.915.83.32.910.119.6
Clothing and footwear15.815.55.64.47.12.28.96.62.85.73.520.66.22.64.66.55.714.1
Rent rates and power7.858.44.139.65.50.44.71.98.3-4.34.21.915.645.3-14.90.22.745.0
Furniture and household goods9.89.04.62.52.42.15.73.16.63.64.32.94.24.24.23.95.39.1
Medical care4.719.22.51.43.85.81.84.315.546.63.68.22.15.44.34.67.58.8
Transport and communication8.04.9-3.110.19.33.79.943.93.74.035.23.00.912.21.31.54.82.4
Recreation and entertainment47.932.66.50.83.520.4-1.11.05.33.4-2.711.13.56.92.22.820.46.2
Education38.360.44.21.84.849.74.03.56.83.96.13.34.081.28.51.53.45.0
Miscellaneous12.613.26.52.52.02.56.47.24.42.29.74.74.86.24.06.38.316.1
Total index11.213.76.05.94.86.09.29.55.35.910.17.83.914.13.14.27.413.1
Source: Central Statistical Office.
Source: Central Statistical Office.
Table 15.Zimbabwe: Employment and Employment Earnings, 1998-2004
1998199920002001200220032004
Employment(Thousands of employees; period average)
Agriculture, forestry and fishing345338325290221158154.4
Mining and quarrying616045434342.150.1
Manufacturing208201181179171140.8135.9
Electricity and water16171191010.710.9
Construction796954414226.224.5
Finance, insurance and real estate283135282838.837.7
Distribution, restaurants and hotels113115103100105116113.5
Transport and communication51454442414037.9
Public administration666359616565.767.8
Education146135140148149150.6150.6
Health282828323226.626
Domestic102102102102102102.1102.1
Other10511310710810595.487.5
Total1,3481,3171,2341,1831,1141012.9998.9
Government1/240226227241246210210
Non-government1,1081,0911,007942868802.9789
Earnings(In millions of Zimbabwe dollars)
Agriculture, forestry and fishing2,9774,1635,72510,72711,956
Mining and quarrying2/2,9574,1224,3317,05916,73245,084
Manufacturing2/9,21612,78218,07830,05458,070119,870
Electricity and water2/2,5863,4404,2996,81010,25120,197
Construction2/2,2822,5494,1734,7447,88114,559
Finance, insurance and real estate2/3,6195,30510,24113,23423,04042,277
Distribution, restaurants and hotels2/4,7757,0229,83315,64529,57755,209
Transport and communication2/3,1564,3957,46310,43917,37930,770
Public administration2/3,9245,72812,68212,95429,07068,498
Education2/10,36014,91430,11639,22274,768151,608
Health2/2,0892,9067,0318,50218,95834,276
Domestic2/191191191191191143
Other2/4,0435,92110,20514,04428,13253,172
Total52,17573,438124,368173,625326,005
Source: Central Statistical Office (CSO).

Public administration, health and education.

Earning figures are up to September 2003

Source: Central Statistical Office (CSO).

Public administration, health and education.

Earning figures are up to September 2003

Table 16.Zimbabwe: Central Government Operations, 1999-2004
199920002001200220032004
(In billions of Zimbabwe dollars)
Total revenue58.687.8136.0304.21,374.78,071.7
Tax revenue55.682.3128.5284.61,325.87,763.0
Income and profits29.752.273.8158.3734.74,076.9
Customs duties8.58.517.427.292.9930.0
Excise duties2.94.15.318.894.6278.8
Sales tax/VAT12.315.729.376.2382.32,377.0
Other taxes2.11.72.74.021.3100.4
Nontax revenue3.05.67.419.649.0308.7
Total expenditure and net lending80.2158.7188.9351.31,394.69,770.7
Current expenditure71.3153.2176.8320.71,233.28,410.7
Goods and services40.679.899.9216.0924.35,016.3
Salaries and wages28.259.564.5123.9528.03,657.6
Other12.520.335.492.1396.41,358.7
Interest on debt21.653.052.849.569.21,302.1
Foreign3.61.611.79.23.3568.0
Domestic18.151.541.140.365.9734.0
Transfers9.020.424.155.2239.72,092.4
Capital expenditure6.32.411.625.2107.71,220.2
Net lending2.63.10.65.453.7139.8
Balance, excluding grants and foreign interest arrears1/-21.6-70.9-53.0-47.2-19.8-1,699.0
Grants2.13.53.00.76.123.0
Foreign interest arrears0.22.811.58.83.3568.0
Balance, including grants and foreign interest arrears1/-19.3-64.6-38.5-37.7-10.5-1,114.6
Financing19.364.638.537.710.51,114.6
Foreign financing-2.32.70.7-1.50.9-2.2
Borrowing6.27.21.40.20.90.0
Repayments-8.5-4.5-0.7-1.70.00.0
Domestic financing21.661.937.839.29.61,116.8
Of which: proceeds of asset sales0.30.06.70.50.00.0
(In percent of GDP, unless otherwise indicated)
Total revenue26.424.319.217.924.933.9
Tax revenue25.122.818.116.824.032.6
Income and profits13.414.410.49.313.317.1
Customs duties3.82.42.51.61.73.9
Other domestic7.86.05.35.89.011.6
Nontax Revenue1.41.51.01.20.91.3
Total expenditure36.243.926.620.725.341.0
Current expenditure32.242.424.918.922.335.3
Goods and services18.322.114.112.716.721.1
Salaries and wages12.716.59.17.39.615.4
Other5.65.65.05.47.25.7
Interest on debt9.814.77.42.91.35.5
Foreign1.60.41.60.50.12.4
Domestic8.214.25.82.41.23.1
Subsidies0.00.00.00.00.033.9
Transfers4.15.63.43.34.38.8
Capital expenditure2.90.71.61.52.05.1
Net lending1.20.90.10.31.00.6
Balance, excluding grants1/-9.8-19.6-7.5-2.8-0.4-7.1
Memorandum item:
GDP at market prices (Z$ billions)2223617091,6985,51923,802
Sources: Zimbabwean authorities; and IMF staff estimates.

On a commitment basis.

Sources: Zimbabwean authorities; and IMF staff estimates.

On a commitment basis.

Table 17.Zimbabwe: Detailed Central Government Revenue, 1999-2004(In billions of Zimbabwe dollars)
199920002001200220032004
Total revenue58.687.8136.0304.21,374.78,071.7
Tax revenue55.682.3128.5284.61,325.87,763.0
Income and profits29.752.273.8158.3734.74,076.9
Individuals19.635.953.1116.4588.83,184.8
Companies6.89.614.930.080.6604.9
Domestic dividends and interest1.43.32.64.522.2206.3
Other income taxes1.93.53.27.543.280.9
Customs duties8.58.517.427.292.9930.0
Oil products0.80.13.35.50.76.8
Other7.78.514.121.792.1923.2
Excise duties2.94.15.318.894.6278.8
Beer1.72.32.712.465.0169.9
Tobacco0.50.81.20.40.976.6
Wine and spirits0.10.20.23.420.713.4
Other beverages0.50.81.22.68.018.8
Sales tax/VAT12.315.729.376.2382.32,377.0
Other taxes2.11.72.74.021.3100.4
Tobacco levy1.21.01.10.93.519.2
Other1.00.71.63.117.881.2
Nontax revenue3.05.67.419.649.0308.7
Investments and property0.51.31.71.21.83.0
Reserve Bank remittances0.10.10.20.40.00.0
Local government interest0.00.00.20.10.00.0
Parastatal interest, dividends, and oth0.41.11.40.71.83.0
Fees0.30.50.71.12.516.4
Other2.23.85.017.344.7289.3
Sources: Zimbabwean authorities; and IMF staff estimates.
Sources: Zimbabwean authorities; and IMF staff estimates.
Table 18.Zimbabwe: Detailed Central Government Expenditure and Net Lending, 1999-2004(In billions of Zimbabwe dollars)
199920002001200220032004
Total expenditure and net lending80.2158.7188.9351.31,394.69,770.7
Current expenditure71.3153.2176.8320.71,233.28,410.7
Current expenditure on goods and services40.679.899.9216.0924.35,016.3
Wages and salaries28.259.564.5123.9528.03,657.6
Other goods and services12.520.335.492.1396.41,358.7
Subsistence and transport1.31.92.66.434.1181.9
Incidental expenses2.34.67.220.843.7860.6
Maintenance of capital works0.92.22.23.918.3269.8
Other8.111.623.561.1300.346.7
Interest payments21.653.052.849.569.21,302.1
Foreign (commitment)3.61.611.79.23.3568.0
Domestic18.151.541.140.365.9734.0
Subsidies and transfers9.020.424.155.2239.72,092.4
Of which: pensions4.08.011.122.677.2772.1
Capital expenditure and net lending8.95.512.230.6161.41,360.0
Capital expenditure6.32.411.625.2107.71,220.2
Net lending2.63.10.65.453.7139.8
Long-term loans (net)2.32.80.65.12.3139.8
Gross lending2.52.90.95.22.32.3
Recoveries-0.2-0.1-0.4-0.10.00.0
Investments0.00.50.00.30.00.0
Short-term loans (net)0.2-0.10.0-0.151.40.0
Sources: Zimbabwean authorities; and IMF staff estimates.
Sources: Zimbabwean authorities; and IMF staff estimates.
Table 19.Zimbabwe: Expenditure and Repayments by Ministries, 1999-2003(In billions of Zimbabwe dollars)
19992000200120022003
Total79.8175.1169.9343.71,284.4
Constitutional and statutory appropriations26.174.252.166.3146.0
President and Cabinet0.00.00.00.00.0
Parliament of Zimbabwe0.00.00.00.00.0
Public Service, Labour and Social Welfare4.08.011.122.677.2
Finance and Economic Development22.166.240.943.668.3
Of which: repayments of loans-7.5-10.0-34.2-2.6-2.4
Audit0.00.00.00.00.0
Local Government, Public Works and National Housing0.00.00.00.00.0
Justice, Legal and Parliamentary Affairs0.00.00.00.10.5
Transport and Communications0.00.00.00.00.0
Vote appropriations53.7100.8117.8277.41,138.4
President and Cabinet1.72.63.06.936.3
Parliament of Zimbabwe0.10.20.30.54.7
Public Service, Labour and Social Welfare1.02.45.515.467.9
Defense10.115.415.837.3148.8
Finance and Economic Development0.93.64.415.311.0
Audit0.00.10.10.31.1
Industry and International Trade0.30.30.45.113.3
Lands, Agriculture and Rural Resettlement1.62.85.129.0125.8
Mines and Energy0.30.40.60.73.4
Foreign Affairs1.42.61.42.19.2
Local Government, Public Works and National Housing1.22.02.610.126.8
Health and Child Welfare4.69.313.634.4130.4
Education, Sport and Culture13.525.636.058.0270.1
Higher Education and Technology3.46.77.214.265.4
Home Affairs3.57.18.921.998.3
Justice, Legal and Parlimentary Affairs1.02.03.28.736.5
Transport and Communications2.01.82.35.834.5
Vote of Credit5.413.74.02.95.0
Rural Resources and Water Development1.31.82.15.522.9
Environment and Tourism0.00.00.41.03.4
Youth Development, Gender, and Employment Creation0.00.50.72.28.6
Other0.30.10.00.015.0
Sources: Zimbabwean authorities; and IMF staff estimates.
Sources: Zimbabwean authorities; and IMF staff estimates.
Table 20.Zimbabwe: Civil Service Employment Budgeted Posts, 1999-2003
19992000200120022003
Total1/163,772161,932160,956167,779173,708
Education, Sport and Culture101,894103,881103,806103,806108,478
Higher Education and Technology3,6812,9013,1123,1123,112
Health and Child Welfare25,17125,17125,43025,43025,430
Lands, Agriculture and Rural Resettlement9,8658,7678,9658,97015,530
Transport and Communications2,321803905892905
Other20,84020,40918,73825,56920,253
Memorandum items:
GDP (in millions of Zimbabwe dollars)228,434328,658564,6401,205,1205,810,253
Wage bill (millions of Zimbabwe dollars)2/28,17559,46864,480123,930527,978
Wage bill (in percent of GDP)2/12.318.111.410.39.1
Sources: Zimbabwean authorities; and IMF staff estimates.

The number of authorized posts at the beginning of each time period indicated, excluding uniformed services.

Including wages for Defense, Zimbabwe Republic Police, and Prison Service.

Sources: Zimbabwean authorities; and IMF staff estimates.

The number of authorized posts at the beginning of each time period indicated, excluding uniformed services.

Including wages for Defense, Zimbabwe Republic Police, and Prison Service.

Table 21.Zimbabwe: Central Government Debt and Debt-Service Payments, 1999-20041/
199920002001200220032004

Est.
(In billions of Zimbabwe dollars)
Total government debt197.4294.9359.0545.12,678.120,028.9
Domestic debt2/78.0162.1194.1345.8590.71,707.6
Stocks8.39.315.213.713.5421.6
Bonds0.10.40.10.10.10.1
Loans0.00.00.00.00.00.0
Public enterprise debt assumed0.40.00.00.00.00.0
Floating debt69.1152.4178.7332.0577.11,285.9
Treasury bills69.1152.3178.7332.0565.71,600.3
Overdrafts and other0.00.10.00.011.4-314.4
External debt3/119.4132.8164.9199.32,087.318,321.3
Stocks0.00.00.00.00.00.0
Bonds0.20.10.10.10.10.0
Loans119.3132.7164.8199.12,087.218,321.3
Debt service
Debt service due (commitments)30.157.583.451.269.21,970.1
Interest21.653.052.849.569.21,302.1
Domestic18.151.541.140.365.9734.0
Foreign3.61.611.79.23.3568.0
Repayments of principal4/8.54.530.61.70.0668.0
Domestic0.00.00.00.00.00.0
Foreign8.54.530.61.70.0668.0
Debt-service arrears0.23.630.639.342.71,357.6
Interest0.22.811.58.83.3568.0
Domestic0.00.00.00.00.00.0
Foreign0.22.811.58.83.3568.0
Repayments of principal4/0.00.819.130.539.4789.6
Domestic0.00.00.00.00.00.0
Foreign0.00.819.130.539.4789.6
(In percent of GDP, unless otherwise indicated)
Total government debt86.581.650.632.148.584.1
Domestic debt2/34.244.927.420.410.77.2
External debt3/52.336.823.211.737.877.0
Debt-service due (commitments)13.215.911.83.01.38.3
Interest9.514.77.42.91.35.5
Repayments of principal4/3.71.24.30.10.02.8
Debt-service arrears0.11.04.32.30.85.7
Interest0.10.81.60.50.12.4
Repayments of principal4/0.00.22.71.80.73.3
Memorandum item:
GDP at market prices (in billions of Zimbabwe dollars)2283617091,6985,51923,802
Sources: Zimbabwean authorities; and IMF staff estimates.

Numbers for 2004 are preliminary estimates.

At cost value.

Estimated at average annual official exchange rates.

Medium- and long-term debt.

Sources: Zimbabwean authorities; and IMF staff estimates.

Numbers for 2004 are preliminary estimates.

At cost value.

Estimated at average annual official exchange rates.

Medium- and long-term debt.

Table 22.Zimbabwe: Money Supply, 1998-2004(In billions of Zimbabwe dollars)
1998199920002001200220032004
Notes and coins in circulation4.36.99.524.777.9433.21,591.2
Demand deposits with the banking system20.427.443.1103.8270.61,626.15,275.8
Narrow money (M1)24.734.352.6128.5348.52,059.36,867.0
Savings deposits with the banking system12.917.123.945.7104.0356.61,356.1
Fixed deposits of 30 days or less with the banking system5.67.023.222.796.6569.4995.9
Broad money (M2)43.158.499.7196.9549.02,985.39,219.1
Fixed deposits of at least 30 days with the banking system13.515.117.941.481.9255.01,235.3
Broad money (M3)56.673.5117.6238.3631.03,240.310,454.4
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.
Table 23.Zimbabwe: Monetary Survey, 1998-20041/(In billions of Zimbabwe dollars, unless otherwise indicated)
1998199920002001200220032004
Net foreign assets2/-27.4-15.3-12.0-12.3-12.4-142.8-1,650.0
RBZ-18.9-11.9-11.5-13.0-14.7-242.5-1,949.0
Deposit money banks and OBIs3/-8.5-3.4-0.50.72.399.7299
Net domestic assets84.088.8129.6250.6643.33,383.112,104.0
Domestic credit76.389.4144.4258.6594.83,174.98,857.3
Claims on government16.222.248.393.5139.8420.02,210.2
RBZ7.23.94.625.843.1292.0581.5
Deposit money banks and OBIs3/9.018.243.667.896.7128.01,628.7
Claims on public enterprises3.44.69.219.746.5214.0690.9
RBZ0.70.70.72.00.60.1254.3
Deposit money banks and OBIs3/2.84.08.517.745.9213.9436.6
Claims on nonbank private sector56.762.687.0145.3408.42,540.95,956.1
RBZ0.81.12.02.32.77.235.4
Deposit money banks and OBIs3/55.961.584.9143.1405.82,533.75,920.8
Other items (net)7.7-0.6-14.8-8.048.5208.23,246.7
Broad money (M3)56.673.5117.6238.3631.03,240.310,454.4
Memorandum items:
Reserve money11.017.820.654.7148.2733.52,329.5
Money multiplier4/5.14.15.74.44.34.44.5
Currency/deposit ratio5/8.110.38.711.514.115.418.0
Reserves/deposit ratio6/22.716.110.314.012.610.57.7
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

The coverage of all monetary aggregates (M1, M2, and M3) includes “Other banking institutions” (OBIs).

Reserve Bank of Zimbabwe’s net foreign assets and net domestic assets have been adjusted for memorandum of deposits.

Includes commercial banks, discount houses, finance houses, and building societies.

Defined as money supply (M3) divided by reserve money.

Defined as notes and coins in circulation divided by total deposits.

Defined as reserves held by deposit money banks at the RBZ divided by their total deposit liabilities.

Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

The coverage of all monetary aggregates (M1, M2, and M3) includes “Other banking institutions” (OBIs).

Reserve Bank of Zimbabwe’s net foreign assets and net domestic assets have been adjusted for memorandum of deposits.

Includes commercial banks, discount houses, finance houses, and building societies.

Defined as money supply (M3) divided by reserve money.

Defined as notes and coins in circulation divided by total deposits.

Defined as reserves held by deposit money banks at the RBZ divided by their total deposit liabilities.

Table 24.Zimbabwe: Assets and Liabilities of Monetary Authorities, 1998-20041/(In billions of Zimbabwe dollars)
1998199920002001200220032004
Net foreign assets1/2/-18.9-11.9-11.5-13.0-14.7-242.5-1,948.6
Foreign assets11.018.215.66.77.1108.71,585.6
Of which: Gold6.18.05.03.02.538.4119.1
Foreign exchange4.810.210.63.64.670.01,457.0
SDR holdings0.00.00.00.10.00.29.5
Foreign liabilities-29.9-30.1-27.1-19.8-21.8-351.2-3,501.6
Of which: Fund credit-15.1-14.1-15.4-14.4-15.3-250.11,825.0
Net claims on government7.23.94.625.843.1292.0581.5
Claims on government36.851.24.625.852.7292.0975.4
Loans and advances3/35.751.20.50.5-9.22.381.8
Treasury bills1.10.04.225.361.9289.7893.6
Government deposits3/29.647.30.00.09.60.0393.9
Claims on nonfinancial public enterprises0.70.70.72.00.60.1254.3
Net claims on private sector7.511.616.331.067.4433.42,855.8
Claims on deposit money banks6.710.514.328.764.7426.22,820.4
Claims on nonbank private sector0.81.12.02.32.77.235.4
RBZ bills-5,139.5
Other items (net; asset +)14.513.510.68.951.8250.65,726.2
Reserve money11.017.820.654.7148.2733.52,329.5
Reserves of deposit money banks6.110.110.428.667.0283.3626.2
Reserves of other banking institutions4/0.50.60.71.32.79.959.6
Currency in circulation4.36.99.524.777.9433.21,591.2
Nonbank deposits0.20.20.10.20.77.252.5
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Net foreign assets are valued at current exchange rates and reflect the Fund’s records for transactions with the Fund.

Reserve Bank of Zimbabwe’s net foreign assets and net domestic assets have been adjusted for memorandum of deposits.

The RBZ reconfigured the loans and advances and government deposits series; this has been reflected in the 2000-01 figures.

Includes finance houses, and building societies.

Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Net foreign assets are valued at current exchange rates and reflect the Fund’s records for transactions with the Fund.

Reserve Bank of Zimbabwe’s net foreign assets and net domestic assets have been adjusted for memorandum of deposits.

The RBZ reconfigured the loans and advances and government deposits series; this has been reflected in the 2000-01 figures.

Includes finance houses, and building societies.

Table 25.Zimbabwe: Consolidated Accounts of Deposit Money Banks and Other Banking Institutions, 1998-2004 1/(In billions of Zimbabwe dollars)
1998199920002001200220032004
Net foreign assets-8.5-3.4-0.50.72.399.7299.0
Foreign assets6.76.09.08.012.7180.4898.5
Foreign liabilities-15.1-9.3-9.3-7.2-10.3-80.7-599.5
Reserves6.510.710.431.991.5620.34,092.4
Of which: currency0.61.31.74.216.296.9298.2
Net credit from Reserve Bank-6.7-10.5-14.7-19.1-61.2-473.9-2,972.8
Net claims on government9.018.243.667.896.7128.01,628.7
Claims on government9.918.445.370.9121.2184.74,073.4
Treasury bills9.718.144.569.4114.5170.83,726.0
Government stock0.20.10.00.86.26.9310.5
Loans and advances0.10.20.80.70.57.136.9
Government deposits-0.9-0.2-1.7-3.1-24.5-56.7-272.6
Claims on nonfinancial public enterprises2.84.08.517.745.9213.9436.6
Claims on private sector55.961.584.9143.1405.82,533.75,920.8
Loans and advances52.755.369.695.5270.01,640.84,053.8
Of which: on-lent external borrowing12.77.27.35.35.733.4215.8
Bills discounted1.41.66.926.978.5575.91,148.7
Bankers’ acceptances0.62.03.66.637.1198.5163.1
Other investments1.22.64.814.020.2118.4355.8
Other items (net; asset +)-6.8-14.1-24.3-28.6-28.6-321.9-594.1
Deposits52.266.4108.0213.5552.42,799.98,810.7
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Includes commercial banks, merchant banks, discount houses, and acceptance houses.

Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Includes commercial banks, merchant banks, discount houses, and acceptance houses.

Table 26.Zimbabwe: Required Reserves and Liquid Asset Ratios, 1998-2004(In percent of liabilities to the public)
1998199920002001200220032004
Required reserve ratios
Deposit money banks 1/
Demand deposits25.030.030.050.050.050.060.0
Savings & time deposits25.030.030.020.020.020.030.0 & 37.5
Finance houses 2/5.05.05.05.05.05.015.0
Building Societies------------------30.0
Discount Houses------------------30.0
Liquid asset ratios 3/
Commercial banks
Prescribed10.010.010.010.010.010.010.0
Actual23.231.034.635.837.032.969.8
Accepting houses
Prescribed10.010.010.010.010.010.010.0
Actual86.7116.076.744.038.027.032.1
Finance houses
Prescribed10.010.010.010.010.010.010.0
Actual13.018.029.235.029.090.0130.8
Building societies
Prescribed10.010.010.010.010.010.010.0
Actual50.662.086.570.269.074.0109.4
Source: Reserve Bank of Zimbabwe.

With effect from 1 February 2001, commercial and merchant banks are required to keep 50 percent of their demand deposits and 20 percent of their savings & time deposits as required reserves.

Base for requirements since May 1981 is liabilities to the public.

The liquid asset ratio is defined as the ratio of liquid assets to the liabilities to the public. Liquid assets consist of the following: (i) notes and coins; (ii) balance with the Reserve Bank and discount houses; (iii) short-term debt (treasury, trad

Source: Reserve Bank of Zimbabwe.

With effect from 1 February 2001, commercial and merchant banks are required to keep 50 percent of their demand deposits and 20 percent of their savings & time deposits as required reserves.

Base for requirements since May 1981 is liabilities to the public.

The liquid asset ratio is defined as the ratio of liquid assets to the liabilities to the public. Liquid assets consist of the following: (i) notes and coins; (ii) balance with the Reserve Bank and discount houses; (iii) short-term debt (treasury, trad

Table 27.Zimbabwe: Selected Interest Rates, 1998-20041/(In percent per year; end of period)
1998199920002001200220032004
Rediscount rate (maximum)2/39.5074.4163.3057.2057.20--120.00
Treasury bills (90 days)35.1969.4161.2425.9425.9279.75132.72
Call money (maximum)37.0087.0057.0059.7050.00600.0040.00
Certificates of deposit (maximum)
3 month42.0080.0065.0036.0042.00600.00100.00
6 month47.0080.0080.0065.0040.00800.00110.00
12 month41.0075.0075.0070.0040.00900.00150.00
24 month40.0070.0060.0070.0050.00900.00150.00
Savings accounts (maximum)
Commercial banks27.5044.0041.0019.0019.0045.0045.00
Building societies14.0014.0014.0014.0012.5041.8518.00
Post Office Savings Bank21.0021.0021.0021.0011.0011.0011.00
Fixed deposits
Commercial banks
3 month40.0050.0046.2515.0019.50350.00100.00
12 month39.0048.5041.7520.5025.00375.00105.00
24 month32.0039.7534.7520.0026.50385.0090.00
Acceptance houses
3 month40.0070.5061.0024.7537.00550.00105.00
12 month35.2551.2540.0027.5031.75450.0075.00
24 month34.7534.8830.0026.5026.00444.0075.00
Finance houses
3 month40.2564.0047.5018.5028.00600.00100.00
12 month42.0057.0052.0025.5035.00300.00100.00
24 month35.0054.5051.50
Post Office Savings Bank
12 month24.0024.0024.0015.0015.0015.0015.00
Average cost of funds
Commercial banks15.7521.8426.4711.2713.4488.5222.92
Lending rates
Commercial banks (minimum)40.5056.0055.0015.0035.0082.00135.00
Commercial banks (weighted average)49.2566.0068.2531.2545.75346.00202.50
Building societies (low-cost housing)24.5021.5028.7525.8830.7544.5085.00
Source: Reserve Bank of Zimbabwe.

Rates are quoted as simple annual rates.

On December 1, 1998, the rediscount rate was replaced by a Reserve Bank rate, which was suspended on November 20, 2002.

Source: Reserve Bank of Zimbabwe.

Rates are quoted as simple annual rates.

On December 1, 1998, the rediscount rate was replaced by a Reserve Bank rate, which was suspended on November 20, 2002.

Table 28.Zimbabwe: Sectoral Analysis of Commercial Banks’ Loans and Advances, 1998-2004
1998199920002001200220032004
(In millions of Zimbabwe dollars)
Total25,00836,56755,08998,545258,0541,467,1204,788,386
Agriculture4,0525,7727,96212,64328,916192,683605,569
Construction5755532,3471,8635,87310,704543,290
Communications3335884092,9833,46723,631180,564
Distribution5,6686,3589,08927,37161,383395,042961,254
Financial and investments1,1201,1216,67710,60212,92096,191199,236
Financial organizations4399724,0961,55217,447109,66793,337
Manufacturing4,1826,4477,71220,29553,864299,197718,502
Mining6332,6415,3704,3326,40318,754150,324
Services5,0417,2646,2326,59736,105144,268365,356
Transport7871,2191,8472,2758,50962,075138,568
Individuals2,1693,1933,1036,40820,088110,449484,794
Other94392451,6243,0794,459347,594
(In percent of total)
Total100.0100.0100.0100.0100.0100.0100.0
Agriculture16.215.814.512.811.213.112.6
Construction2.31.54.31.92.30.711.3
Communications1.31.60.73.01.31.63.8
Distribution22.717.416.527.823.826.920.1
Financial and investments4.53.112.110.85.06.64.2
Financial organizations1.82.77.41.66.87.51.9
Manufacturing16.717.614.020.620.920.415.0
Mining2.57.29.74.42.51.33.1
Services20.219.911.36.714.09.87.6
Transport3.13.33.42.33.34.22.9
Individuals8.78.75.66.57.87.510.1
Other0.01.20.41.61.20.37.3
Source: Reserve Bank of Zimbabwe.
Source: Reserve Bank of Zimbabwe.
Table 29.Zimbabwe: Sectoral Analysis of Merchant Banks’ Loans and Advances, 1998-2004
1998199920002001200220032004
(In millions of Zimbabwe dollars)
Total11,6717,0378,44912,46856,061396,879434,669
Agriculture9268265236044,39014,46385,574
Distribution4,3921,5472,0492,3819,676187,69852,199
Financial and investments164581507126,5303,322
Financial organizations2001431744304451,50913,126
Manufacturing2,3582,0172,4714,80522,033104,197109,590
Mining1,7326811,2077722,9835,50159,905
Services8225707571,1706,27245,64938,249
Transport1862352174151,7092,5639,683
Individuals13516712815582417,05516,021
Other7567939081,7367,01711,71447,001
(In percent of total)
Total100.0100.0100.0100.0100.0100.0100.0
Agriculture7.911.76.24.87.83.619.7
Distribution37.622.024.319.117.347.312.0
Financial and investments1.40.80.20.01.31.60.8
Financial organizations1.72.02.13.40.80.43.0
Manufacturing20.228.729.238.539.326.325.2
Mining14.89.714.36.25.31.413.8
Services7.08.19.09.411.211.58.8
Transport1.63.32.63.33.00.62.2
Individuals1.22.41.51.21.54.33.7
Other6.511.310.713.912.53.010.8
Source: Reserve Bank of Zimbabwe.
Source: Reserve Bank of Zimbabwe.
Table 30.Zimbabwe: Nonbank Financial Institutions’ Assets, 1998-2004(In millions of Zimbabwe dollars, unless otherwise indicated)
1998199920002001200220032004
Post Office Savings Bank, total assets6,6627,3258,01614,29222,18957,092187,252
Claims on government1,5421,8392,0752,7913,8434,486117,700
Claims on public enterprises8591,3881,1381,7642,1481,5227,509
Claims on the private sector8899429421,0351,0491,0642,372
lnterbank NCDs and call money1/2,1071,8882,3857,22213,64046,25929,800
Other assets00001761,3474,057
Reserves1,2651,2701,4781,4791,3332,41425,815
Building societies, total assets18,05424,32432,40252,572107,556333,204948,107
Claims on government1,9556,92811,54214,5567,2607,663233,365
Claims on public enterprises2204430106100100100
Claims on the private sector11,12810,91711,27116,84335,575104,142224,273
lnterbank NCDs and call money1/2,3122,8905,00310,71432,61763,80776,742
Other assets1,4872,9403,1525,45812,72364,597207,985
Reserves9536061,4044,89619,28292,895205,642
Finance houses, total assets6,9836,8997,05614,65740,960104,192384,097
Claims on government5544674568081,6465,293121,704
Claims on public enterprises2640014300500
Claims on the private sector5,8885,8065,5959,26933,09067,38766,714
lnterbank NCDs and call money1/571211581961,5935,280121,306
Other assets1721975198152,20014,38614,036
Reserves2622132683,3852,43111,84659,837
Foreign assets24556141000
Consolidated other banking institutions,
Total assets31,69738,54847,47565,448132,562307,0031,519,456
Claims on government4,0509,23314,07218,15612,74917,442472,768
Claims on public enterprises1,1051,4721,1682,0132,2481,6228,109
Claims on the private sector17,90517,66517,80827,14769,714172,593293,359
lnterbank NCDs and call money1/4,4754,8997,54618,13247,850115,346227,848
Other assets4,1625,2796,881000226,078
Insurance and pension funds, total
Asset base42,70651,68363,04477,727123,683220,709873,014
Life insurance27,44134,67942,33750,82576,745151,120418,000
Professional life reinsurance2463963163566195,7725,800
Nonlife insurance1,7941,2801,6462,3074,3357,881157,566
Professional nonlife reinsurance2,1441,7231,5732,5774,9299,24281,167
Self-administered pension funds11,08113,60517,17221,66237,05546,694210,481
Prescribed securities9,59710,63512,47915,21122,85628,063338,267
Life insurance5,2106,6597,4837,8647,53912,701115,837
Professional life reinsurance118222241288420448448
Nonlife insurance2474457147561,4602,231100,256
Professional nonlife reinsurance1024356646991,1331,62828,845
Self-administered pension funds3,9202,8743,3775,60412,30411,05692,882
Total nonbank financial sector
Total assets42,70651,68363,04477,727123,683220,709873,014
Of which: claims on government9,59710,63512,47915,21122,85628,063338,267
Share in total (in percent)22.520.619.819.618.512.738.7
Source: Reserve Bank of Zimbabwe.

NCDs are negotiable certificates of deposit.

Source: Reserve Bank of Zimbabwe.

NCDs are negotiable certificates of deposit.

Table 31.Zimbabwe: Balance of Payments, 1998-2004(In millions of U.S. dollars, unless otherwise indicated)
1998199920002001200220032004

Est.
Current account balance (excluding official transfers)-37247-38-82-213-346-421
Trade balance-95249293323-18-108-310
Exports, f.o.b.1,9251,9242,2002,1141,8021,6701,680
Imports, f.o.b.-2,020-1,675-1,907-1,791-1,821-1,778-1,989
Of which: emergency food imports000-68-337-206-161
Nonfactor services-59-2-164-186-181-216-108
Receipts630621331256217185317
Payments-689-623-495-441-398-401-424
Investment income-385-355-358-333-242-191-208
Interest-184-140-141-149-123-114-99
Receipts3037261010107
Payments-214-176-168-159-133-124-106
Other (net)-201-215-217-184-119-76-109
Private transfers (net)166155191114228169204
Capital account (including official transfers)560143-227-386-317-210-170
Official transfers (net)771015340383824
Direct investment (net)436501602349
Portfolio investment (net)1121-1-68-242
Long-term capital (net)96-3-155-285-281-228-221
Short-term capital (net)-60-26-140-73-94-2717
Errors and omissions-229-2271302927479344
Overall balance-41-37-135-177-456-476-247
Financing4137135177456476247
Gross official reserves (- increase)648256119
Arrears (- decrease)0114281292570443240
Net use of Fund resources5-28-70-86-86-65-23
Net other liabilities90-107-130-41-309821
Memorandum items:
Gross official international reserves1/55472216151625
In months of imports of goods and services0.30.20.10.10.10.10.1
Current account balance (in percent of GDP)2/-4.00.5-0.4-1.0-2.6-4.6-5.7
Sources: Zimbabwean authorities; and IMF staff estimates.

End of period; usable reserves.

GDP at world prices using real GDP growth and trading partner countries’ inflation (base year is 1996).

Sources: Zimbabwean authorities; and IMF staff estimates.

End of period; usable reserves.

GDP at world prices using real GDP growth and trading partner countries’ inflation (base year is 1996).

Table 32.Zimbabwe: External Trade Indicators, 1998-2004(1990=100, unless otherwise indicated)
1998199920002001200220032004

Est.
Exports
Value (in U.S. dollars terms)109.8109.8125.5120.6102.895.395.8
Percent change-20.60.014.3-3.9-14.7-7.30.6
Volume109.6114.1122.197.383.486.878.6
Percent change-10.34.17.0-20.3-14.34.1-9.5
Unit value (in U.S. dollars terms)100.296.2102.892.495.6109.7121.9
Percent change-11.5-4.06.9-10.23.514.811.1
Imports
Value (in U.S. dollars terms)133.7110.9126.2118.5120.5117.7131.7
Percent change-23.9-17.113.9-6.11.6-2.311.9
Volume157.4123.0137.0136.4135.7108.8102.1
Percent change-14.2-21.811.4-0.5-0.5-19.8-6.2
Unit value (in U.S. dollars terms)84.990.192.186.988.8108.2129.0
Percentage change-11.36.12.2-5.72.121.919.2
Terms of trade117.9106.8111.6106.3107.7101.494.5
Percent change-0.2-9.54.6-4.81.3-5.8-6.8
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.
Table 33.Zimbabwe: Exports by Commodity, 1998-20041/(Values in millions of U.S. dollars; volumes in thousands of kilograms, unless otherwise indicated)
1998199920002001200220032004

Est.
Agricultural exports805.5844.4855.8832.8646.6516.0384.2
Tobacco523.8612.0548.7594.3434.7321.3226.7
Volume173.3216.2180.4198.2143.5103.369.9
Unit value3.02.83.03.03.03.13.2
Sugar62.951.596.470.064.254.853.9
Volume200.9162.6248.2179.5150.0113.8139.1
Unit value0.30.30.40.40.40.50.4
Maize46.49.12.50.00.00.00.0
Volume311.775.820.80.00.00.00.0
Unit value0.10.10.10.10.10.30.3
Cold Storage Company beef32.132.639.722.72.30.20.0
Volume8.58.711.37.70.50.10.0
Unit value3.83.83.52.94.62.04.8
Coffee51.237.217.115.05.45.94.1
Volume12.710.06.56.24.94.83.7
Unit value4.03.72.62.41.11.31.1
Horticulture67.082.6125.4118.9126.6118.784.1
Volume40.148.633.839.940.338.428.7
Unit value1.71.73.73.03.13.12.9
Other agricultural22.219.426.112.013.415.015.4
Mineral exports395.2387.0440.4390.8297.8390.8604.2
Gold2/236.1229.7216.4225.8159.5152.3262.8
Volume821.5825.4778.4827.2512.9417.3672.0
Unit value287.4278.3278.0273.0311.0365.0391.0
Asbestos36.135.661.160.039.342.419.4
Volume112.9113.0134.1129.0151.9170.282.0
Unit value0.30.30.50.50.30.20.2
Nickel44.248.177.935.231.868.595.7
Volume10.18.19.06.34.97.37.4
Unit value4.45.98.75.66.59.412.9
Platinum3.43.511.417.514.577.4174.4
Volume9.49.421.135.611.6128.4368.7
Unit value0.40.40.50.51.20.60.5
Copper4.15.38.00.68.94.62.6
Volume2.63.44.40.52.62.61.2
Unit value1.61.61.81.23.41.82.2
Other mineral58.164.865.551.743.845.649.3
Manufacturing exports629.4609.1814.9313.5287.3691.2620.9
Ferrous alloys143.1152.1154.881.8106.8119.8185.1
Volume233.5236.9274.0222.2306.8264.5247.5
Unit value0.60.60.60.40.30.50.7
Cotton lint150.1111.9156.081.953.267.2122.1
Volume79.784.2114.080.052.248.0114.2
Unit value1.91.31.41.01.01.41.1
Iron and steel8.312.515.03.522.339.922.9
Volume36.855.065.215.378.8138.0106.3
Unit value0.20.20.20.20.30.30.2
Textiles and clothing58.059.379.320.217.728.213.8
Machinery and equipment12.417.050.68.65.212.81.9
Chemicals25.827.364.35.83.55.19.6
Other manufacturing231.6229.0294.9111.778.6418.2265.5
Total exports3/1,924.91,924.52,200.51,575.21,397.91,670.31,679.7
Sources: Reserve Bank of Zimbabwe; Central Statistical Office; and IMF staff estimates.

At the official exchange rate.

Volume in thousands of ounces and unit value in U.S. dollars per ounce.

Excludes estimated unidentified exports and internal freight.

Sources: Reserve Bank of Zimbabwe; Central Statistical Office; and IMF staff estimates.

At the official exchange rate.

Volume in thousands of ounces and unit value in U.S. dollars per ounce.

Excludes estimated unidentified exports and internal freight.

Table 34.Zimbabwe: Direction of Export Trade, 1998-2004(In percent of total exports)
1998199920002001200220032004
Industrial countries48.347.946.744.053.425.329.7
Australia0.50.50.70.40.30.20.2
Austria0.60.30.30.50.20.10.3
Belgium3.11.51.30.50.70.30.5
Denmark0.50.72.60.50.30.30.3
France0.71.02.32.32.50.50.5
Germany7.78.15.48.37.45.54.0
Italy3.33.77.21.82.31.03.7
Japan4.87.34.86.69.46.42.8
Netherlands3.02.42.61.82.71.61.4
Portugal1.31.10.51.21.00.70.7
Spain2.32.51.81.65.20.81.4
Sweden0.60.70.50.40.20.00.0
Switzerland2.52.53.20.79.53.56.0
United Kingdom10.69.87.412.67.53.85.9
United States6.75.95.94.64.40.91.9
Developing countries32.931.331.030.332.729.646.0
Botswana4.43.73.61.62.11.92.5
China, People’s Republic of1.05.64.17.11.23.24.8
Malawi3.63.92.00.53.71.02.7
Mozambique3.22.03.52.01.81.21.0
South Africa13.111.914.017.716.820.630.2
Democratic Republic of Congo0.50.40.80.60.80.20.7
Zambia7.23.73.00.86.41.54.0
Other industrial and developing countries18.820.822.325.713.945.024.4
Total100.0100.0100.0100.0100.0100.0100.0
Sources: Central Statistical Office; and IMF, Direction of Trade Statistics
Sources: Central Statistical Office; and IMF, Direction of Trade Statistics
Table 35.Zimbabwe: Imports by Principal Commodities, 1998-20041/
1998199920002001200220032004

Est.
(In millions of U.S. dollars)2/
Food87826268337206161
Tobacco and beverages29266144393644
Crude materials745812598877996
Fuel and electricity277223372335352456462
Of which: petroleum products225172180172149110342
Oils and fats41394030272530
Chemicals336289311408361328401
Machinery and transport equipment801600493424375341417
Other manufactured goods325298324273241220269
Other50611201119890110
Total2,0201,6751,9071,7921,8211,7781,989
(In percent of total imports, unless otherwise indicated)
Food4.34.93.23.818.511.68.1
Petroleum products11.110.39.59.68.26.217.2
Memorandum item:
Official exchange rate (Zimbabwe dollars per
U.S. dollar; period average)21.4138.2044.4255.0555.04498.084,131.16
Sources: Central Statistics Office; and IMF staff estimates.

On f.o.b. basis.

At the official exchange rate.

Sources: Central Statistics Office; and IMF staff estimates.

On f.o.b. basis.

At the official exchange rate.

Table 36.Zimbabwe: Direction of Import Trade, 1998-2004(In percent of total imports)
1998199920002001200220032004
Industrial countries31.028.920.314.114.613.112.1
Australia1.10.70.50.40.20.20.3
Austria0.50.30.10.50.10.00.1
Belgium1.01.41.10.50.40.20.4
Denmark0.40.40.30.20.20.20.2
France3.12.92.11.40.71.11.0
Germany3.75.22.42.53.32.01.8
Italy2.01.11.00.40.63.50.4
Japan4.84.03.11.62.31.91.1
Netherlands1.31.40.80.70.50.30.6
Sweden0.50.50.40.30.40.10.2
United Kingdom6.86.43.73.02.92.34.0
United States5.84.64.72.52.91.51.9
Developing countries42.443.636.442.246.955.657.8
Botswana1.71.93.41.82.31.84.3
India1.41.40.80.70.760.720.46
South Africa38.539.431.439.043.450.750.5
Zambia0.80.90.80.80.52.32.5
Other industrial and developing countries26.627.543.343.738.531.330.2
Total100.0100.0100.0100.0100.0100.0100.0
Sources: Central Statistical Office; and IMF, Direction of Trade Statistics
Sources: Central Statistical Office; and IMF, Direction of Trade Statistics
Table 37.Zimbabwe: International Reserves, 1998-2004(In millions of U.S. dollars, unless otherwise indicated; end of period)
1998199920002001200220032004
Total gross reserves1/296479288121129131255
Gold83105455537391
IMF reserve tranche position0000000
SDRs0000000
Foreign exchange130268243669292254
Total foreign monetary liabilities744599381321353422451
IMF liabilities407369281262276303294
Other short-term liabilities2/3372301005977119157
Net reserves-448-120-93-200-224-291-196
Memorandum items:
Gross official usable international reserves55472216151625
(in months of imports of goods, f.o.b.)0.30.20.10.10.10.10.1
Gold (in millions of fine troy ounces)0.620.730.470.190.110.11
Source: Reserve Bank of Zimbabwe.

Official gross reserves include pledged and illiquid assets.

Includes open general import license (OGIL) short-term facility, Reserve Bank stand-by credits, foreign currency deposits held by residents, and foreign bank deposits.

Source: Reserve Bank of Zimbabwe.

Official gross reserves include pledged and illiquid assets.

Includes open general import license (OGIL) short-term facility, Reserve Bank stand-by credits, foreign currency deposits held by residents, and foreign bank deposits.

Table 38.Zimbabwe: External Debt Outstanding By Creditors, 1998-2004
1998199920002001200220032004
Public and publicly guaranteed debt (excl. arrears)3,7853,5563,1122,6642,5942,5452,306
Medium- and long-term debt (excl. arrears)3,5533,3242,8802,4322,3622,3132,074
Bilateral creditors1,2381,1411,0319269771,019935
Multilateral institutions1,9041,8291,5821,3201,2291,1701,038
IMF39236828419098417
IBRD498473416392421449417
Others1,014989881738710680614
Private creditors410353267186156124102
Short-term debt (excl. arrears)232232232232232232232
Private debt (excl. arrears)67264249837725615770
Total debt (excl. arrears)4,4574,1983,6103,0422,8502,7022,376
Arrears on public and publicly guaranteed debt91234048031,5202,1412,584
Medium- and long-term debt972136361,1731,7032,049
Bilateral creditors1169166337519642
Multilateral institutions00783145858391,009
IMF00076169262305
IBRD000506295
Others0078233416515609
Private creditors8666157251344398
Short-term external debt074457657184
Other public and publicly guaranteed arrears1/0109147109282368451
Total arrears91234048031,5202,1412,584
Total debt4,4664,3214,0143,8454,3704,8434,960
Public and publicly guaranteed debt3,7943,6793,5163,4684,1144,6864,890
Private debt67264249837725615770
(In percent of GDP)
Medium and long-term debt40.940.640.639.748.260.063.7
Of which: public and publicly guaranteed38.338.137.937.446.358.362.2
Short-term debt7.27.26.45.64.94.43.7
Memorandum item:
GDP (in millions of U.S. dollars)2/9,2949,0378,5458,4928,2437,5247,356
Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Arrears on supplier credits and interest on arrears.

Nominal U.S. dollar GDP adjusted for real growth and international inflation (1996 base year).

Sources: Reserve Bank of Zimbabwe; and IMF staff estimates.

Arrears on supplier credits and interest on arrears.

Nominal U.S. dollar GDP adjusted for real growth and international inflation (1996 base year).

Table 39.Zimbabwe: Summary of the Tax System as of June 2005(All amounts in Zimbabwe dollars)
TaxNature of TaxExemptions and DeductionsRates
1.Taxes on net income and profits
1.1Taxes on companies, corporations, and enterprises
Companies Income Tax, Chapter 23:06; amended by Acts 1/80, 11/80, 10/81, 55/81, 30/82, 32/83, 7/84, 24/84, 19/85, 5/88, 10/88,22/89, 10/90, 19/90,21/91, 17/92, 12/93, 19/94, 4/95, 17/95, 23/95, 4/96, 10/96, 13/96, 17/97,23/97,29/98, 9/99, 17/99, 21/99, 22/99, 6/00, 18/00, 22/01, 27/01, and 15/02.Annual income tax is levied on taxable income of companies (including branches of foreign corporations) from all sources within Zimbabwe. Income from other sources is not liable to tax except for interest. Taxable income is defined as gross income (excluding accruals of a capital nature and exempt income) less allowable deductions incurred in the process of production. The assessment year runs from January to December. Tax on the past year’s liability (for the tax year ending in December) and payment of corporate tax on current taxable income was introduced on January 1, 2005. This is to be phased in over a three-year period as follows:



2005

100 percent of 2004 profits

35 percent of 2005 forecast profits



2006

65 percent of 2005 profits

70 percent of 2006 forecase profits



2007

30 percent of 2006 profits 100 percent of 2007 profits



Tax is payable thrice yearly in February, June, and November on a 50 percent, 25 percent, 25 percent basis, respectively.
Interest on specified government borrowing and postal savings is tax exempt. Deductions allowed include expenditure and losses (other than of a capital nature) to the extent that they are incurred for the purposes of the taxpayer’s trade or in the process of his production expenditure. These include repairs and maintenance, as well as depreciation computed on either the straight line or reducing balance basis. A special initial allowance, equal to 50 percent in the year of purchase and 25 percent in the second and third years is available for equipment purchases, farm improvements, industrial buildings, licensed hotels, and railway lines erected and used by the tax payer for the purpose of his trade. Special allowance treatment of commercial buildings is provided for in designated growth point areas. Additional 15 percent investment allowance for new investments in designated growth point areas. Additional 15 percent training investment allowance for training buildings and new training equipment.Basic tax: 30 percent of taxable income.



Growth point areas: Profits from approved new manufacturing operations in designated growth point areas are taxable at 10 percent for the first five years of operation.



Export incentives: Companies which export 50 percent more of their manufacturing are taxed at 20 percent.



Withholding tax on contracts: Starting in April 1995, firms bidding on government contracts that do not provide evidence of a valid income tax return face 10 percent withholding on the value of the contract. Provision of the withholding tax on contracts has been extended to consultancy and other services offered to government and quasi-government institutions as well goods and services exchanged between registered and nonregistered businesses. Withholding on real estate and insurance commissions was also introduced at 20 percent.
1.2Individual income tax

(income tax Act, Chapter 23: 06)
Annual tax on income of individuals derived from all sources within Zimbabwe. Income from other sources is not liable to tax except for interest and dividends. Taxable income is defined as gross income (excluding accruals of capital nature and exempt income) less allowable deductions. The tax payable is determined by calculating the gross tax chargeable by applying the appropriate rate to the taxable income, and deducting from the result the credit that the individual is entitled to. The tax of employed individuals is collected in advance from their weekly or monthly wages based on PA YE (pay-as-you-earn) tax tables. Advances are credited against the tax eventually assessed and also through a Final Deduction System. Benefits in the form of soft loans (other than for educational or medical reasons) and private use of company cars are taxable. The assessment year runs from January to December. The personal income tax is not fully global, with scheduler taxes for capital gains, domestic dividends, and t-bill interest.Most of the deductions allowed to companies are also allowable to individuals (see 1.1); interest on government borrowing is exempt. Spouses are taxed separately. Special credits of Z$500,000 for handicapped persons are allowable. Tax credits include an elderly persons credit of Z$500,000 and 50 percent of medical expenses. The first Z$5 million of bonuses is tax exempt.



Exemptions from income tax for fringe benefits of persons employed in Export Processing Zones (EPZs), and no income taxation of dividends, interest, royalties, and fees earned from activities in the EPZs. The first Z$ 1,440,000 of employer contributions to pension funds are deductible from taxable income tax.
Basic tax

Taxable income

(in Z dollars)


Rate

(in percent)
Up to 12,000,0000-
12,000,001-18,000,00010
18,000,001-36,000,00020
36,000,001-60,000,00025
60,000,001-84,000,00030
84,000,001-108,000,00035
108,000,001 and over40
Nonresident shareholders’ tax: 15 percent on dividends paid by listed domestic companies to nonresident shareholders. 20 percent applies in the case of unlisted companies.



Nonresident tax on interest:

10 percent withholding tax on interest paid to nonresidents. Creditable.



Nonresident tax on fees:

20 percent withheld from fees payable to nonresident persons in respect of any service of a technical, managerial, administrative, and consultative nature. Creditable where fees are subject to both income tax and nonresidents’ tax.



Nonresident tax on remittances:

20 percent, withheld at source.



Resident tax on interest:

20 percent is deducted at source from interest payable by building societies, banks, discount house, or other financial institutions to a person (including trusts) ordinarily resident in Zimbabwe.



Automated Financial Transaction Tax:

A Z$500 tax is levied on every Automated Teller Transaction, i.e., on withdrawal of cash or debit to account through Automated Teller Machines.



Informal Traders—Tax: Rentals payable by the post office savings bank and some building society investments, as well as interest on Tax Reserve Certificates are exempt from tax.



Intermediated Money Transfer tax:

The intermediated money transfer tax at a rate of Z$50 per transaction.
1.3Capital gains taxA tax on the surplus of revenue over cost from the disposal of marketable securities and fixed property (applicable to both individual and companies).If the gains in any year do not exceed Z$ 100,000, no tax is payable. If losses do not exceed that amount, they cannot be carried forward. Local authorities, pension funds, and certain other organisations and agencies are exempt. Rollover is allowed on the principal private residence and business property.



Disposal of principal private residential house by elderly taxpayers is also exempt from withholding tax.
A flat rate of 20 percent. An inflation allowance of 100 percent of the change in the average CPI over the period the asset was held is deducted from the asset price to offset the effects of inflation on asset prices. An ordinary rate of 20 percent is charged on sales of houses.



Gains on securities: Gains related to that disposal of marketable securities that are not listed at the Zimbabwe Stock Exchange taxed at 10 percent.
1.4Betting and gambling taxes

Betting and Totalizator Control Act, (Chapter 10:02) 33/76, 41/778, 32/79, 1/80, 5/83, 18/89, 15/94, 146/92; Pools Control Act, Chapter 87; and Casino Act, Chapter 77).
Replaced by the VAT in January 2004.
2.Social security contributionsPayroll tax instituted in October 1994 for the National Social Security Authority.Domestic (household) workers.Employers and employees: 3 percent each of wages and salary (excluding Benefits), with a maximum wage and salary base of Z$4,000 per month
3.Payroll taxesNone.
4.Taxes on property
4.1Real estates taxesA local government tax levied annually on the value of real estate.The scope of real estate covered and the valuation differ widely among local governments.Rates differ among local governments. Rates vary from Z$30 to Z$150 per unit of land (400 hectares) in commercial farming areas.
4.2Net wealth taxNone.
4.3Estate duty

(Estate Duty Act, Chapter 23:20)
Payable on the value of the assessed estate of a deceased person.An abatement exempts estates valued at less than Z$400 million where the deceased did not leave a surviving spouse. The family home is not included in the value of the estate.Rate varies up to 20 percent when the dutiable amount is Z$400 million or more.
4.4Property transfer taxStamp duties payable on transfers of property.Z$5 for every Z$100, or part thereof, of marketable securities; 10c for every Z$100, or part thereof, of other moveable property; 35c for every Z$100, or part thereof, of immovable property; Z$500 for cheques; and 3c for every Z$l of insurance policies.
5.Taxes on goods and services
5.1Value added tax.

(Value Added Tax Act, Chapter 23:12)
Multi-stage tax levied and collected on each transaction in the production and distribution chain. Businesses registered for VAT can deduct the VAT they pay, as input tax. The person who acquires the goods or services for private use is not allowed a deduction for VAT paid and thus bears the cost of the tax. Exports of goods from Zimbabwe do not attract VAT (they are zero rated). Imports on the other hand are subject to VAT. Effective January 1, 2004, potential registrants for both goods and services should have annual turnover of Z$250,000,000 or more to register.Taxable services include professional services (services of lawyers, accountants, engineers and the like), transportation, construction activities, and the letting of non-residential property. Basic commodities such as fresh meat and fish, milk, maize, bread, illuminating paraffin, and vegetables, as well as goods for use by disabled persons are exempt.



For firms in Export Processing Zones, a refund is given on value added tax paid on inputs.
Standard rate of 15 percent of retail price of all taxable supplies of goods and services.
5.2Excise duties

(Customs and Excise Act, Chapter 17;7; amended by Acts 23/79, 24/79, 2/80, and Customs and Excise (Suspension) Regulations, 1980, SI 645/80, and SI 55/81).
Dutiable goods include liquor and tobacco products. Tax levied at the manufacturing level.Exports and imports are exempt. Imports that compete with excisable domestic goods are subject to customs rates that are equal to or greater than the excise tax rate.Cigarettes: 60 percent and Z$30,000 per 1,000 cigars.

Beer: Clear beer, 45 percent; Opaque beer, 0 percent.



Alcoholic spirits: 10 percent.

Carbonated beverages: 0 percent.



Wines: Wholly produced in Zimbabwe, 10 percent; Other, 5 percent.
5.3Selective tax on serviceNone.
5.4Business licenses

(Shop License Act of 1976).
An annual levy on selected businesses.Rates vary between urban and rural areas.
5.5Motor vehicle taxTax on motor vehicles. Heavy vehicles are taxed by the Central Government and all the receipts are granted to local government. In some regions where local governments do not have tax administration, the Central Government (through post offices) collects this tax and grants the proceeds to the regions.Rates vary between urban and rural areas.
6. Taxes on international trade and transactions.
6.1Tax on importsCustoms duty.Imports by the central government are exempt. Special concessions are applied to some goods produced in specified countries by agreement. Firms in Export Processing Zones are allowed duty-free importation of new materials.Tariff basically consists of a single schedule. Rates are mostly ad valorem and applied to the c.i.f. value. Classification is based on the Harmonized System.

(In percent)
Raw materials5
Capital goods0
Partly processed inputs15
Intermediate goods20-30
Finished goods40-85
Gasoline5
Diesel5
Jet Fuelfree



Vehicles:
l,000cc to l,500cc60
l,500cc to 3,000cc75
3,000cc and over80



Carbonated beverages5
Alcoholic spirits10
Cigarettes60
Wines wholly:
Produced in Zimbabwe10
Other wines5
Apparel: 65 percent plus Z$100,000 per kilo.

Batteries: 25 percent to 60 percent plus Z$100 each.

Consumer electronics: 40 percent to 65 percent plus Z$100 each.



Road user levy:



An additional duty of Z$94, Z$101, and Z$134 per litre for diesel, unleaded, and leaded petrol, respectively.
6.2SurtaxSurtax on imports of final goods.Imports by the central Government and selected goods for statutory bodies (related to their primary lines of business) are exempt.10 percent on imported second motor vehicles that are five years old and older. No surtax on all other goods.
6.3Taxes on exportsNone.
6.4Exchange taxes
Tobacco levyTax on turnover at tobacco auctions, which are usually held between April and October. Introduced in May 1996.1 percent payable by both buyer and seller.
Source: Zimbabwe Revenue Authority.
Source: Zimbabwe Revenue Authority.

Prepared by Michael Andrews and Jennifer Mbabazi-Moyo (both MFD).

With a market capitalization of about Z$ 14 trillion (59 percent of GDP) or US$2.48 billion at the official exchange rate at December 2004.

Statutory requirements are currently 60 percent for demand deposits and 37.5 percent for savings deposits.

This is based on the presumption that government continues to service its debt. A banking crisis could ensue if banks suffered losses through default on their large holdings of government securities.

The nominal increase was much higher at 213 percent for assets and 155 percent for loans but this may misleading given the high level of inflation.

The Productive Sector Facility (PSF) was introduced in the December 2003 monetary policy statement with a view to provide subsidized credit (at 50 percent when the facility wound up at end-June 2003) to key productive sectors.

Demand deposits attract zero interest.

Inflation was 133 percent at end-2004.

RBZ has performed stress testing in line with previous IMF stress testing. The stress testing undertaken here differs from the RBZ in its treatment of the interest rate shock and in the magnitude of the shocks.

Other Resources Citing This Publication