Overview

EXECUTIVE SUMMARY Outlook. Zimbabwe's economy is at a crossroads. The post-hyperinflation rebound has ended and the outlook is for sluggish growth in 2015. Sustained growth and poverty reduction will require comprehensive reforms over the medium term. Following the slowdown in reform implementation in the post-election period, new momentum for policy reform is building up. This presents a window of opportunity for a deeper engagement and a potential path toward normalizing relations with the international community. Performance under the SMP. The SMP that expired in June 2014 provided an important anchor for macroeconomic policies. Zimbabwe succeeded in keeping macroeconomic conditions relatively stable, despite difficult political and economic circumstances. The authorities? renewed commitment to the policies under the program was key to meeting all targets and benchmarks for the third review. Successor SMP. The main objective of the new program is to strengthen the country's external position, as a prerequisite for arrears clearance, resumption of debt service, and restored access to external financing. To that end, the authorities will strive to consolidate the fiscal position, accumulate international reserves, and mobilize international support for resolving the country's external debt situation. They will also aim to restore confidence in the financial sector, as well as improve public debt and financial management. Finally, the authorities plan to make progress in a number of key structural reform areas in order to enhance the business climate, boost productivity and competitiveness, and build confidence. Risks. The most salient domestic risks stem from possible policy slippages that may undermine support for the authorities? strategy to normalize relations with creditors. The lack of progress on reforms would further worsen the external position, set back the country's capacity to repay, and ultimately hurt the chances for economic recovery. Even in the absence of policy slippages, adverse political developments may complicate the authorities? efforts to garner broad support for their strategy. The benefits to economic prospects from a successful implementation of the program and resumed relations with creditors would outweigh the downside risks that, if materialized, would maintain the current status quo.

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9781336010055

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