• IMF exposes US$193 million social spending shortfall as Zimbabwe misses its protected expenditure target despite stronger government revenue and improved fiscal performance
• Zimbabwe’s 2026 revenue forecast rises to US$11.6 billion, supported by stronger tax collections, while mineral exports lift the projected current account surplus to 5.3% of GDP
• IMF forecasts economic growth slowing to 3.5% in 2027 amid El Niño drought risks, with US$22.7 billion in public debt and foreign currency market reforms complicating the outlook

Harare- Zimbabwe’s latest IMF assessment has exposed a US$193 million shortfall in protected social and priority spending during the first half of 2026, even as government revenue and the external trade position performed better than expected. The finding is contained in the International Monetary Fund’s 67-page second-review report published on November 11, which details the economic gains and fiscal pressures facing the country ahead of the 2027 National Budget.

The IMF approved completion of the review on October 7. Its latest publication provides the underlying analysis of the government’s performance under a ten-month Staff-Monitored Program. All end-June quantitative targets and structural benchmarks were met. The protected social spending floor was the exception, having been missed again because of implementation and financing bottlenecks.

The distinction has practical consequences for Zimbabweans. Lower inflation and a stable official exchange rate have improved short-term predictability, while delayed spending has affected programmes intended to support vulnerable households and education. The Fund now regards US$345 million as a realistic full-year protected social spending outcome, compared with the original US$755 million indicative target.

Government revenue has been revised sharply upward. The IMF expects US$11.6 billion in collections during 2026, compared with US$10.3 billion forecast in its first review. Second-quarter revenue reached US$2.798 billion against an earlier projection of US$2.326 billion. Corporate tax and VAT collections contributed to the improvement as stronger activity and tax administration expanded receipts.

The extra revenue has lifted the projected overall cash fiscal surplus to US$1.4 billion from US$800 million. Stronger balances give the Treasury capacity to accumulate deposits and absorb some external shocks. The Fund estimates that a combination of drought-related spending and higher energy prices could cost approximately US$300 million under its assumptions.

Expenditure composition raises questions about how the resources are being deployed. Second-quarter capital expenditure and net lending reached US$586 million against US$269 million projected in the first review. The report identifies US$316 million in capital overspending on roads, dams and settlement of earlier obligations. Underspending in other areas, including transfers, helped preserve the overall fiscal surplus.

The social spending shortfall arose partly from weaknesses in cash management and implementation. Payments under the Basic Education Assistance Module were suspended pending an audit to verify beneficiaries and align commitments with available funding. The authorities have since prepared a programme-specific financing plan and partially resumed payments. The Fund wants improved execution so that approved spending translates into services and payments.

Zimbabwe’s export performance provided another source of strength. US-dollar exports rose 52 percent through July compared with the same period in 2025, supported by gold, lithium and platinum-group metals. Imports increased 31 percent, including purchases of capital goods. The IMF has raised its projected 2026 current account surplus to 5.3 percent of GDP from 3.2 percent.

The mining expansion has created a fiscal challenge of its own. The gold incentive scheme pays eligible suppliers premiums of 5, 7 or 9 percent according to monthly delivery volumes. Record production and elevated prices have pushed its cost above three times the annual budget appropriation. The government has committed to cap the scheme at US$300 million in 2026 and in the 2027 Budget. The IMF recommends simplifying the incentives and improving competition and transparency in gold marketing.

Monetary conditions have improved substantially. Annual ZiG inflation was 2.9 percent in August and 3.7 percent in September, supported by tight liquidity conditions and a broadly stable official exchange rate. The Reserve Bank increased its foreign currency market interventions to nearly daily operations from June, compared with four to seven times per month previously. The IMF reported a parallel-market premium of approximately 15 to 17 percent during the review period.

That premium matters for importers and businesses with obligations denominated in US dollars. Official exchange-rate stability does not by itself establish that firms can purchase all the foreign currency they need at the quoted rate. The Fund supports a more transparent trading platform and a gradual, carefully sequenced move towards a more market-based foreign exchange system.

Debt remains Zimbabwe’s major obstacle to international financial re-engagement. Public and publicly guaranteed debt was estimated at US$22.7 billion at the end of 2025, including US$15.2 billion in external obligations. More than half of external public debt was in arrears to official creditors. The IMF continues to classify the debt as unsustainable and in distress, limiting access to concessional financing.

Completion of the Staff-Monitored Program can strengthen Zimbabwe’s record in discussions with creditors. The programme carries no IMF loan and does not automatically deliver arrears clearance. The government must still negotiate a credible and financed debt resolution arrangement. Oversight of state-owned enterprises, including borrowing controls on Mutapa Investment Fund, also features in the IMF’s governance recommendations.

The economic forecast anticipates a difficult agricultural year. Real GDP is expected to grow 5 percent in 2026, slow to 3.5 percent in 2027 as El Niño-related drought affects output, and recover to 5 percent in 2028. Food import requirements and the cost of fuel could increase pressure on public spending and foreign currency demand.

The IMF projects 2027 revenue at US$12.5 billion and expenditure of US$12.4 billion, with a cash primary surplus of approximately US$397 million needed for scheduled debt service. The Budget will therefore have to reconcile social spending commitments, infrastructure investment and debt obligations within the available financing envelope.

For businesses, the next tests will be the actual release of budgeted funds, access to foreign exchange, the treatment of outstanding government arrears and the timing of debt negotiations. For households, the more immediate measure is the delivery of social assistance and education support. The IMF’s second review documents a significant improvement in macroeconomic management, alongside a spending execution problem that stronger revenue alone has not resolved.

-Equity Axis News