Business / Economy
IMF and AfDB issues conflicting reports on Zimbabwe's growth prospects
27 Jun 2011 at 11:36hrs | Views
The International Monetary Fund (IMF) and the African Development Bank (AfDB) have this month issued three conflicting projections about Zimbabwe's economic prospects, a development that might confuse investors.
On June 22, the AfDB in its monthly economic review, projected that Zimbabwe's economy will grow by 7, 8 percent this year. The previous day, the IMF had downgraded Zimbabwe's growth to 5.5 percent from a 9.3 percent projected by the country's Ministry of Finance.
However, the IMF on June 23 released new projections after its team concluded its fact finding mission to Harare and said the economy will now grow by between 7.5 and eight percent.
IMF's head of delegation, Vitaliy Kramarenko, said improved performance by the agriculture sector necessitated the review.
"Under these policy assumptions and a favourable outlook for commodity prices, the economy is projected to grow by 7.5 percent to eight percent in 2011," Kramarenko said in a report issued after the visit.


"The slight upwards revision to growth, compared with projections at the time of Article IV staff report, reflects the faster-than-expected growth in agriculture, particularly tobacco and maize."
But he noted that growth prospects were still threatened by further wage increases, commodity price declines, higher-than-anticipated increases in imports, food and fuel prices, reversals of capital inflows and the banking system instability.
Gertrude Ariston, an economist, said the different projections were not good for economic planning.
"Economic planners are in a state of confusion as research institutions are coming up with different projections, a scenario we are not witnessing in other countries," she said.
Ariston argues that while it was common knowledge that Zimbabwe is not economically stable, finance institutions should synchronise their growth projections.
"When IMF reviewed its projection to 7.5 percent, no sound reasons were offered and that tend to confuse economic planners and potential investors," she said.
Zimbabwe's Finance Minister Tendai Biti will announce a midyear budget on July 15 and he is under pressure to give civil servants a meaningful salary increase.
Analysts say the budget must recognise the limited fiscal space the unity government is operating under.
The country has a US$2,7 billion budget for this year, which almost entirely depends on local resources.
On June 22, the AfDB in its monthly economic review, projected that Zimbabwe's economy will grow by 7, 8 percent this year. The previous day, the IMF had downgraded Zimbabwe's growth to 5.5 percent from a 9.3 percent projected by the country's Ministry of Finance.
However, the IMF on June 23 released new projections after its team concluded its fact finding mission to Harare and said the economy will now grow by between 7.5 and eight percent.
IMF's head of delegation, Vitaliy Kramarenko, said improved performance by the agriculture sector necessitated the review.
"Under these policy assumptions and a favourable outlook for commodity prices, the economy is projected to grow by 7.5 percent to eight percent in 2011," Kramarenko said in a report issued after the visit.


"The slight upwards revision to growth, compared with projections at the time of Article IV staff report, reflects the faster-than-expected growth in agriculture, particularly tobacco and maize."
But he noted that growth prospects were still threatened by further wage increases, commodity price declines, higher-than-anticipated increases in imports, food and fuel prices, reversals of capital inflows and the banking system instability.
Gertrude Ariston, an economist, said the different projections were not good for economic planning.
"Economic planners are in a state of confusion as research institutions are coming up with different projections, a scenario we are not witnessing in other countries," she said.
Ariston argues that while it was common knowledge that Zimbabwe is not economically stable, finance institutions should synchronise their growth projections.
"When IMF reviewed its projection to 7.5 percent, no sound reasons were offered and that tend to confuse economic planners and potential investors," she said.
Zimbabwe's Finance Minister Tendai Biti will announce a midyear budget on July 15 and he is under pressure to give civil servants a meaningful salary increase.
Analysts say the budget must recognise the limited fiscal space the unity government is operating under.
The country has a US$2,7 billion budget for this year, which almost entirely depends on local resources.
Source - www.theafricareport.com
