• Growth Recovery and Stabilization: IMF welcomed the "recent tightening of policies" and noted a "growth recovery amid favourable terms of trade and fading effects from adverse climate shocks
• Fiscal Challenges and Revenue Gains: The Board praised revenue mobilization efforts providing "some reprieve" to fiscal pressures
• Monetary Tightening and ZiG Stability: The IMF commended the "halting of quasi-fiscal operations and monetary financing," which reduced inflation to 0.3% monthly by June 2025

Harare- Zimbabwe's economy has navigated a turbulent path marked by hyperinflation, currency instability, and external shocks, but the 2025 IMF Article IV consultation highlights a tentative stabilisation amid persistent vulnerabilities. Concluded on October 2, 2025, the consultation based on discussions in Harare from June 4 to 18, 2025 paints a picture of recovery from a severe 2024 slowdown, crediting policy tightening for curbing inflation and exchange rate pressures.

The IMF Executive Board welcomed these strides, while urging deeper reforms to address fiscal strains and structural weaknesses. This analysis draws on the IMF's staff report and related data to unpack key findings, with a focus on what the IMF explicitly commended, supported by verified economic indicators.

Recovery from 2024's Downturn: Growth Projections and Drivers

Zimbabwe's real GDP growth decelerated sharply to 1.7% in 2024 from 5% in 2023, primarily due to an El Niño-induced drought that slashed agricultural output by 15% and disrupted hydropower, leading to electricity shortages that rippled into mining and manufacturing. Declining prices for key exports like platinum and lithium further dampened mining activity, a sector contributing over 12% to GDP.

However, the first half of 2025 saw a rebound, fuelled by improved rainfall, record-high gold prices (averaging $2,400 per ounce, up 24% from 2024), and robust remittance inflows of over 1.8 billion.

The IMF projects 6% growth for 2025 (MoFED targets 6.6%), driven by agricultural recovery and sustained commodity tailwinds, with the current account surplus widening to 2.5% of GDP from 1.1% in 2024. This outlook aligns with World Bank estimates, which also forecast a 6% rebound, emphasising mining's role where gold exports alone generated $2.5 billion in 2024, over 30% of total exports. The Board applauded this resilience, noting the "growth recovery amid favorable terms of trade and fading effects from adverse climate shocks."

Fiscal Pressures and Revenue Gains: A Mixed Balance Sheet

Fiscal dynamics remain strained, with net external financing turning negative in 2024 as concessional inflows dried up. The SDR allocation totalling SDR 1.404 billion (about $1.9 billion at prevailing rates), disbursed on August 23, 2021, as part of the IMF's $650 billion global pandemic response provided critical budget support but was fully utilised by mid-2024 for imports, debt servicing, and social spending.

This exhaustion exacerbated a financing gap, contributing to nearly $600 million in domestic expenditure arrears by year-end 2024, up from $200 million in 2023, as spending on public wages (rising 20% to 10% of GDP) and capital outlays outpaced resources.

Yet, revenue mobilisation offered relief: the tax-to-GDP ratio climbed from 11.5% in 2023 to 13% in 2024, bolstered by slashing VAT exemptions (reducing relief from 5% to 3% of GDP), taxing pandemic-era public sector allowances, hiking fees and levies, and anti-smuggling measures that recovered  over $100 million in lost duties.

The fiscal deficit held steady at 4.5% of GDP across both years, financed via T-bills (up 30% issuance) and RBZ overdrafts. The IMF Board praised these revenue efforts as providing "some reprieve," highlighting their role in stabilizing the deficit despite heightened spending needs like Treasury-assumed RBZ debt and Mutapa Investment Fund asset acquisitions. This recognition validates the authorities' focus on broadening the tax base, which the IMF estimates could add 2-3% to GDP if sustained.

Monetary Tightening and ZiG Stabilisation: Curbing Inflationary Pressures

The introduction of the Zimbabwe Gold (ZiG) in April 2024 at 13.56 ZiG per USD aimed to anchor the currency with gold and forex reserves. However, rapid monetary base expansion of 215% from April to September 2024, driven by RBZ financing of debt including to contractors before the SADC Summit triggered a 43% devaluation on September 27, 2024, to 24.4 ZiG per USD. This stemmed from quasi-fiscal operations that flooded liquidity, pushing monthly inflation to 20% in October 2024.

Post-devaluation, the RBZ halted monetary financing, raised reserve requirements on ZiG and FX deposits to 30%, and hiked the policy rate from 20% to 35%. These steps slowed base money growth to 30% from October 2024 to April 2025, narrowing the premium between the official Willing-Buyer-Willing-Seller (WBWS) rate and parallel market to 20% by September 2025 from 50%. Inflation eased to 0.3% monthly by June 2025, with annual rates at the lowest since 2020.

The IMF Board explicitly "welcomed the tightening of policies, notably the halting of quasi-fiscal operations and monetary financing," crediting them for "helping reduce inflation and achieve a degree of macroeconomic stability." This applause is grounded in the direct link: pre-tightening, liquidity growth correlated with 95% annual ZiG inflation, post-measures, it dropped.

These gains, however, are tempered by the RBZ's outsized FX market role, funded by 30% surrender requirements on exporters (up from 25% in 2023), which distort pricing and delay payments to exporters and contractors. The IMF notes this as a barrier to full liberalisation, recommending gradual redirection of surrenders through banks to shrink the central bank's footprint.

Progress on Financial Oversight and Structural Reforms

The consultation lauds advances in financial regulation, including steps toward Basel III implementation, which raised bank capital adequacy ratios to 12% by mid-2025 from 9% in 2023. This bolsters resilience in a sector holding billions in assets, 70% USD-denominated.

On governance, anti-money laundering/combating the financing of terrorism (AML/CFT) reforms were highlighted as "recent progress," critical for medium-term growth projected at 3.5% absent deeper changes.

Debt Reengagement via the Structured Dialogue Platform

Zimbabwe's $21.5 billion public debt (97% of GDP in 2024) remains unsustainable, with $13 billion in external arrears blocking concessional finance. The Structured Dialogue Platform (SDP), launched in December 2022 and facilitated by former Mozambican President Joaquim Chissano, structures talks on three pillars: economic reforms (fiscal consolidation), governance (AML/CFT), and land tenure/farmers' compensation ($3.5 billion disbursed since 2020). The IMF Board acknowledged these "reengagement efforts" as pivotal for arrears clearance, noting a stronger reform track record potentially via a Staff Monitored Program could unlock support.

Since inception, SDP has held six high-level meetings, yielding draft reform matrices endorsed by the African Development Bank and IMF.

IMF's Balanced Verdict: Momentum, But Reforms Essential

The Board's assessment aligns with staff views: Zimbabwe's policy pivot has delivered stability inflation down from 100% peaks in 2023, growth rebounding to 6% but low reserves (now at $900 million) and arrears accumulation demand action. Commendations centre on monetary discipline and revenue hikes, which have forestalled a fiscal crisis despite SDR depletion.

With the next consultation due in 12 months, sustaining this trajectory through SDP-backed reforms could restore access to $1-2 billion in annual external finance, per IMF projections. As Zimbabwe eyes a Staff Monitored Program in early 2026, the 2025 findings affirm that targeted tightening, not just commodity booms, underpins the fragile progress.

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