IMF slashes Zimbabwe's growth forecast due to El Nino-induced drought

Zimbabwe two-dollar notes in Harare on November 12, 2019. [AP]

Zimbabwe's economic growth is expected to decelerate to 2 percent in 2024 from 5.3 percent last year due to the effects of an El Nino-induced drought, the International Monetary Fund (IMF) has said.

The growth, however, is expected to rebound strongly to about 6 percent in 2025, supported by a recovery in agriculture and ongoing capital projects in the manufacturing sector, the IMF said in a statement released late Thursday following the end of its staff mission to Zimbabwe.

The IMF's projections are similar to those of the Reserve Bank of Zimbabwe, the country's central bank, which on Thursday revised growth downward to 2 percent.

The IMF said higher import bills are also worsening the balance of payments outlook, as Zimbabwe needs to import a substantial amount of grain to augment local supplies following the drought, which cut cereal production by 77 percent.

The IMF noted the positive impact of the new currency, Zimbabwe Gold (ZiG), introduced in April, saying it has brought exchange rate stability and an end to a bout of macroeconomic instability experienced in the first quarter of the year.

"Assuming that macro-stabilization is sustained, cumulative inflation in the remainder of the year is projected at about 7 percent," the IMF predicted.

The IMF also said it welcomes improvements in monetary policy discipline but recommends further refinements to the policy framework to ensure currency and price stability.