By Ray Ndlovu
THE International Monetary Fund (IMF) has warned of a further slowing of Zimbabwe’s gross domestic product (GDP) growth to 5% this year.
This is the slowest since 2006 and below the 5.6% projected by Finance Minister Tendai Biti in his midterm fiscal policy review in July.
Mr Biti revised the country’s growth targets from 9.4% to 5.6%, following low diamond revenue meant to boost state coffers, a big public service wage bill and poor performance of the agricultural sector.
An IMF report released this week says the economic rebound that followed the formation of the unity government in 2009 is "moderating". The report comes after a visit by IMF executives to Zimbabwe last week to discuss its debt arrears. Those talks ended on Friday.
"Real GDP growth in 2012 is projected to slow to 5%, reflecting the impact of adverse weather conditions on agriculture, erratic electricity supply, and tight liquidity conditions ," the report shows.
But the country’s enormous debt is stifling efforts to stabilise the economy.
"Zimbabwe remains in debt distress, with total external debt estimated at $10.7bn (113.5% of GDP) at end-2011, of which 67% of GDP is in arrears. The large debt overhang remains a serious impediment to medium-term fiscal and external sustainability," the report read.
Alongside Sudan and Somalia, Zimbabwe owes the IMF under the special drawing rights a combined $2bn. Sudan owes 76%, Somalia 18%, while Zimbabwe makes up 6% of the debt. IMF directors have advised the government to refrain from incurring nonconcessional debts — such as using special drawing rights resources — to prevent the worsening of debt distress. The advice comes at a time when Mr Biti is seeking $400m from the Southern African Development Community countries to support the country’s budget.
Mr Biti met his South African counterpart Pravin Gordhan last week for talks on a $100m loan. Mr Biti yesterday refused to give details of the meeting with Mr Gordhan, saying only that it was "fruitful and promising".
Instability across the banking sector was a concern and the IMF signalled that troubles that rocked three banks — Genesis, Interfin and Renaissance Merchant Bank — had spread across the sector. "Some banks, particularly the small ones, show weak capitalisation, insufficient liquidity, and low asset quality, reflecting unsound lending practices and poor risk management," the report read.