A few things we learnt about Zim economic reforms from the IMF review

So we have been having a look at the International Monetary Fund report.

The review which was released on Monday indicated an increasingly positive attitude towards reforms in Zimbabwe by the institution.

The report noted that ‘Zimbabwe’s economic difficulties have deepened’ citing a couple of factors:

Drought, erratic rains, and increasing temperatures, have reduced agricultural output and disrupted hydropower production and water supplies
Economic activity is severely constrained by tight liquidity conditions resulting from limited external inflows and lower commodity prices.
Inflation remains in negative territory, because of the appreciating U.S. dollar—the country’s main currency—and lower commodity prices. Zimbabwe remains in debt distress and the level of international reserves is low.

But there were positives:

The authorities have reduced the fiscal deficit in both 2014 and 2015
They started to rationalize public expenditures by implementing recommendations from the 2015 civil service audit
They are also amending the Public Financial Management and Procurement Acts
The Reserve Bank of Zimbabwe has taken measures to restore confidence in the financial sector. All banks in operations now have capital buffers above the minimum requirements. Bank supervision was also lauded in light of prevailing world trends to make sure the sector was transparent and worked within laws,
The office of the president and cabinet has led reform in the ease of doing business in Zimbabwe with legislation being amended to ensure this.
Critical action on land issues for 99-year leases to soon be used as collateral has been lauded.
Labour market flexibility legislation targets were met.

The stress was made on what was called bold reforms and the report stressed the existing commitment of the authorities in Zimbabwe.

Commitments that have been made to reduce the public wage bill to 66% by year end and 50% by end of 2019. It added that the government could also consider moving to a 13th check paid only if economic growth exceeds a particular level.

There is also a need to improve debt management, develop a comprehensive public financial management strategy, and strengthen VAT policy and key processes in revenue administration.

Contrary to prevailing pub-crawler opinion, the IMF does not have an issue with indigenisation. Instead what it needs is clear policy on implementation especially for existing businesses and how transfer of shares will be financed.

They encouraged the authorities to continue to strengthen bank supervision and risk management, facilitate financial deepening, and promote financial inclusion.

The fund also stressed the need for more work in improving the investment climate, tackling corruption, and promoting economic diversification.

On bond coins, the fund credited them for helping in correcting the pricing of goods and service.

About that Afreximbank loan linked to liquidity issues it said:

The Afreximbank-supported $200 million interbank facility (AFTRADES) is helping to address liquidity challenges.

Indications are that it is this facility that was referenced earlier this week linked to the bond note introduction.

The key thing we see in this is that the authorities are actually putting in work to reform the economy.

The reforms as is their nature won’t be pretty but they are like a necessary surgical procedure. It’s not pleasant but going forward you will be better.

Meanwhile click here to have a look at the 98-page report in full. It makes for some compelling reading.