- Zimbabwe Advances IMF Re-Engagement Push After Strong Second-Review Performance
Zimbabwe has taken another step towards rebuilding its relationship with international creditors after reaching a staff-level agreement with the International Monetary Fund on the second review of its 10-month Staff-Monitored Program, with authorities meeting almost all quantitative and structural reform targets through the end of June.
The agreement, reached after an IMF mission to Harare from September 7 to 17, is subject to approval by IMF Management. The programme does not involve IMF financing or an Executive Board lending decision, but is intended to help Zimbabwe establish a policy track record that could support arrears clearance, debt restructuring and eventual re-engagement with international lenders.
IMF staff said implementation through end-June was strong, with all quantitative and indicative targets met except the floor on protected social and priority expenditure. The government also completed both end-June structural benchmarks: publication of the finalised user manual for the Zimbabwe Social Registry and development of a Treasury Single Account reform strategy.
The latest review strengthens a reform process that began with the approval of the Staff-Monitored Program earlier this year. The programme focuses on fiscal discipline, monetary restraint, foreign-exchange reform, stronger public financial management, governance and social protection, while seeking to prevent the accumulation of new domestic arrears.
The macroeconomic backdrop has improved markedly. Zimbabwe’s economy expanded 8.3% in 2025 and is projected by IMF staff to grow by 5% in 2026. Annual inflation fell to 2.9% in August, supported by tight monetary conditions and relative exchange-rate stability, while the current account is expected to remain in surplus on the back of strong export receipts and remittance inflows.
Those gains represent a significant stabilisation achievement for an economy that has repeatedly struggled with high inflation, currency instability and limited access to external financing. But the IMF is warning that preserving those gains will require continued policy discipline rather than assuming that recent improvements are permanent.
The Reserve Bank of Zimbabwe has been urged to maintain its tight monetary stance until inflation expectations are firmly anchored and confidence in the Zimbabwe Gold currency, or ZiG, strengthens further. The central bank is also developing an electronic foreign-exchange trading platform and a broader strategy to liberalise the FX market, improve monetary-policy operations and reform the intervention framework.
That reform agenda is critical because exchange-rate credibility remains central to Zimbabwe’s wider re-engagement strategy. The IMF’s first-review assessment had already identified relative currency stability, strong mining activity, favourable gold prices and an agricultural rebound as important supports to the economy in 2026.
Fiscal performance has also been stronger than expected. Robust revenue collection through the first half of the year has provided scope to build buffers while keeping expenditure within the approved budget. The IMF nevertheless stressed that better cash planning, expenditure control and domestic arrears management will be needed to preserve fiscal credibility.
Zimbabwe again missed the indicative target for protected social and priority expenditure, an area the IMF described as a significant concern. The Fund said weaknesses in cash planning and budget execution had prevented approved resources from reaching priority programmes and vulnerable households on time, despite stronger-than-expected revenue performance.
The missed target is particularly important because it was also a weakness during the first review. IMF staff had previously noted that while quantitative targets and structural benchmarks were largely met, protected social and priority spending fell short, highlighting the tension between fiscal restraint and the need to protect vulnerable households.
That tension could become more acute next year.
The IMF now expects economic growth to slow to 3.5% in 2027 because of the anticipated effects of a super El Niño event, even after accounting for mitigation measures planned by the authorities. Inflation is expected to remain in single digits and the current account in surplus, but the outlook could deteriorate if the climate shock is more severe than expected or policy responses are delayed.
The new projection is weaker than the 4.2% baseline growth estimate used during the first review, when the IMF warned that El Niño could push growth into a 2%-3% range under a more adverse scenario.
Governance reforms are another important part of the re-engagement strategy. The IMF welcomed progress on the National Anti-Corruption Strategy 2, publication of financial statements by the Mutapa Investment Fund and steps towards publishing financial statements for its portfolio companies. The Fund said stronger financial reporting and effective implementation of governance reforms would be necessary to improve oversight of public assets and contain fiscal risks.
Public financial and debt-management reforms have also advanced, including efforts to bring US-dollar payments into the government’s formal financial-management system and strengthen commitment controls and expenditure monitoring. The authorities have additionally completed a framework for liability-management operations intended to ensure debt transactions are transparent and consistent with the medium-term debt strategy.
The larger objective remains resolution of Zimbabwe’s external arrears and restoration of debt sustainability.
The IMF has made clear that strong performance under the SMP does not itself clear arrears or unlock financing. Instead, it is meant to provide evidence of sustained policy implementation that can support negotiations with creditors and strengthen the case for eventual normalisation of Zimbabwe’s external financial relationships.
Zimbabwe’s second-review performance therefore represents progress, but not an endpoint.
The harder test will be whether the government can preserve low inflation and exchange-rate stability, maintain fiscal discipline, protect social spending and withstand a potential El Niño shock while advancing debt-resolution talks.
For Zimbabwe, successful re-engagement will ultimately depend not simply on meeting IMF benchmarks, but on converting reform credibility into arrears clearance, restored debt sustainability and renewed access to international finance.
