IMF urges Zimbabwe to build US$275m food security buffer

The International Monetary Fund (IMF) has urged Zimbabwe to set aside at least US$275 million from stronger-than-expected revenue collections to cushion the economy against potential food shortages arising from an El Nino event.

In its latest review of Zimbabwe's performance under the Staff Monitored Programme, the IMF welcomed the country's improved fiscal position but cautioned the Government against using all the additional revenue to finance spending.

The Fund wants authorities to keep expenditure within the approved 2026 budget while saving part of the revenue windfall to meet potential food-security pressures in 2027.

The IMF said building a fiscal buffer of at least US$275 million would enable Government to respond quickly to food-security needs without accumulating new arrears or compromising priority social spending.

Zimbabwe recorded a US$371 million primary cash surplus during the first quarter of 2026, around US$320 million above the programme target.

Revenue collections also exceeded expectations by US$560 million, supported by stronger economic activity, improved VAT and customs collections, higher personal income tax receipts and enhanced tax administration.

The IMF expects Zimbabwe's total revenue for 2026 to reach approximately US$10.3 billion, equivalent to about 16% of gross domestic product. The Fund projects a cash primary surplus of around 1.7% of GDP for the year.

However, the IMF warned that the improved fiscal position could come under pressure if an El Nino event develops later this year and extends into early 2027.

A significant El Nino-related drought could severely affect agricultural production and food security, while simultaneously putting pressure on Government finances.

The Fund warned that such a scenario could reduce revenue collections while increasing Government expenditure on grain procurement to protect vulnerable households.

The call for a fiscal buffer comes as Zimbabwe seeks to strengthen its resilience to climate and commodity shocks.

Finance Minister Mthuli Ncube said Government's strategy was focused on making the economy less vulnerable to external shocks through diversification and increased agricultural resilience.

"These risks underscore the need to intensify economic diversification, enhance value addition and beneficiation, as well as accelerate targeted irrigation development to strengthen resilience to climate-related shocks," Ncube said in the 2026 budget strategy paper.

Social spending misses target

While praising the stronger fiscal position, the IMF raised concerns over the under-execution of social and priority spending.

Zimbabwe missed its protected social and priority spending target by US$84 million during the first quarter.

The shortfall affected several programmes, including the Basic Education Assistance Module (BEAM), Pfumvudza and the Social Protection Management Information System.

The IMF has urged Government to improve the implementation of these programmes, particularly as potential climate shocks could increase the number of vulnerable households requiring assistance.

The Fund also recommended that Zimbabwe limit gold incentives to US$300 million in 2026 as part of efforts to maintain fiscal discipline.

Other recommendations include clearing domestic arrears, further liberalising the foreign-exchange market and maintaining a tight monetary policy stance.

The IMF also called for continued progress towards external debt restructuring and the clearance of arrears, which remain key components of Zimbabwe's efforts to restore access to international financing.

The latest recommendations highlight the delicate balance facing Government: preserving the gains made in fiscal consolidation while ensuring that stronger revenue collections are used to build reserves rather than fuel additional expenditure.

With the possibility of a major El Nino event looming over the 2026/27 agricultural season, the IMF believes the proposed US$275 million buffer could provide critical fiscal space should food-security pressures intensify.