Economic growth in Zimbabwe is forecast to fall to half of 2021’s levels as a result of mounting fiscal instability and a decline in agricultural output, according to the International Monetary Fund (IMF) on Monday.

"After rising to about 7% in 2021, real GDP growth is expected to decline to about 3.5% in 2022" as erratic rains and rising macroeconomic instability hamper agriculture, Dhaneshwar Ghura, head of a visiting IMF team, said in a statement.

Zimbabwe has suffered an economic downturn for close to two decades, and fresh price and exchange rate depreciation pressures have returned. Inflation skyrocketed to 285% in August, according to the IMF, a rise from 60% at the start of the year.

"Uncertainty remains high, however, and the outlook will depend on the evolution of external shocks, the policy stance, and implementation of inclusive growth-friendly policies," Ghura said following a visit to the country’s capital Harare.

The International Monetary Fund provides technical support to Zimbabwe, but is unable to offer financial aid to the country “due to unsustainable debt and official external arrears,” he added.

Indeed, should a financial deal be reached, it would need external debt arrears to be cleared, a reduction in poverty, macroeconomic stability and transparency reforms.

Ghura’s IMF statement added: “The IMF mission notes the authorities’ efforts to stabilise the local foreign exchange market and lower inflation. In this regard, the recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap.”

The statement continued: “Further efforts are needed to durably anchor macroeconomic stability and accelerate structural reforms. In line with recommendations from the 2022 Article IV consultation, the near-term macroeconomic imperative is to curb inflationary pressures by further tightening monetary policy, as needed, and allowing greater exchange rate flexibility through a more transparent and market-driven price discovery process, tackling FX market distortions, and eliminating exchange restrictions.”