2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Zimbabwe


2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Zimbabwe

Fund Relations

(As of December 31, 2019)

I. Membership Status: Joined: September 29, 1980; Article VIII

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IV. Outstanding Purchases and Loans: None

V. Latest Financial Arrangements:

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VI. Overdue Obligations and Projected Payments to Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

VII. Implementation of HIPC Initiative: Not Applicable

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

IX. Implementation of Catastrophe Containment and Relief (CCR): Not Applicable

Lifting of Remedial Measures following clearance of arrears to the PRGT:

On October 20, 2016, Zimbabwe fully settled its overdue financial obligations to the Poverty Reduction and Growth Trust (PRGT) using its SDR holdings. Zimbabwe had been in continuous arrears to the PRGT since February 2001. As of the day of repayment, Zimbabwe’s arrears to the PRGT amounted to SDR 78.3 million, which comprised overdue PRGT principal of SDR 61.7 million, and total interest obligations of SDR 16.6 million (covering overdue interest and interest accrued through October 20, 2016 on overdue principal and interest amounts). The repayment of SDR 78.3 million has been applied towards the PRGT’s Reserve Account.

Effective November 14, 2016, the Executive Board of the International Monetary Fund (IMF) approved the removal of the remedial measures applied to Zimbabwe. These measures had been in place because of Zimbabwe’s overdue financial obligations to the Poverty Reduction and Growth Trust (PRGT). These remedial measures related to: (i) the declaration of noncooperation with the IMF (see Press Release No. 02/28); (ii) the suspension of technical assistance (which had already been partially lifted, see Press Release No. 09/152 and Press Release No. 12/405); and (iii) the removal of Zimbabwe from the list of PRGT-eligible countries (see Press Release No. 01/40).

Zimbabwe is now current on all its financial obligations to the IMF. Its eligibility to the PRGT has also been restored.

Exchange Arrangement

On February 20, 2019, Zimbabwe introduced a new domestic currency—named the Real Time Gross Settlement (RTGS) dollar—and adopted a de jure floating exchange rate arrangement, previously a “no separate legal tender” arrangement. The RBZ denominated legally, through Statutory Instrument (SI) 33 of 2019, the existing RTGS balances, bond notes and coins in circulation as RTGS dollars making them part of the multi-currency system in Zimbabwe. An inter-bank foreign exchange market was established to formalize the trading of RTGS dollar balances and bond notes with the United States Dollars and other currencies on a willing seller-willing buyer basis through banks and bureau de changes. This decision to establish a flexible exchange rate market was taken in consultation with Government and business taking into consideration the distortions in the market caused by multi-pricing. The RTGS dollar was renamed as the Zimbabwean dollar (ZWL$) in June 2019. The de facto exchange rate arrangement was reclassified to floating from other managed, effective February 20, 2019.

Facing severe imbalance of payment and US dollar liquidity pressures, the authorities continue to maintain a series of measures to limit current and capital account transactions. These measures have given rise to several exchange restrictions and multiple currency practices (MCPs), inconsistent with Article VIII, Section 2(a) and Section 3, in particular:

a. Under the official guidance issued by the Reserve Bank of Zimbabwe (RBZ), commercial banks are required to prioritize their foreign exchange (FX) sale to finance specific categories of international transactions which constitutes an exchange restriction as it limits the availability of FX for payments and transfers for current international transactions, in particular in the non-priority or low priority categories. Further, the prioritization also results in an MCP as it channels some of the non-priority or low-priority transactions to the bureau market which has an exchange rate of more than 2 percent in excess of that in the interbank market.

b. The RBZ also allocates FX to finance certain necessity imports, and purchases repatriated FX proceeds that exporters are required to sell (surrender) to the RBZ, at the prior business date’s interbank rate. These allocation and purchase transactions at the prior business date’s interbank rate constitute an MCP as this rate has recently deviated and may continue to deviate by more than 2 percent from the prevailing FX rate for other FX transactions taking place on the same date. The FX allocation here also gives rise to an exchange restriction as it limits the availability of FX for payments and transfers for other current international transactions not eligible to receive such allocation.

c. Zimbabwe has also a longstanding exchange restriction subject to IMF jurisdiction arising from unsettled balances under an inoperative bilateral payment agreement with Malaysia.

Article IV Consultations

Zimbabwe is on the standard 12–month consultation cycle. The Executive Board discussed the staff report for the 2017 Article IV consultation on July 5, 2017.

Joint World Bank—IMF Work Program, 2020–21

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Statistical Issues

As of December 31, 2019

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Table 1.

Zimbabwe: Common Indicators Required for Surveillance

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Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

The Zimbabwe dollar is no longer traded against foreign currencies on the exchange market.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discounts rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Note: This table reflects data submission as of January 31, 2020.