Zimbabwe has strengthened its economic stabilisation record under the International Monetary Fund’s Staff-Monitored Programme, but the latest IMF assessment shows that improved growth, lower inflation and stronger government revenues have yet to resolve the country’s most difficult economic problem: an external debt burden that remains unsustainable and continues to restrict fiscal space and access to new financing.

The IMF’s first review of Zimbabwe’s 10-month Staff-Monitored Programme found that all five quantitative targets were met through March 2026, while all structural benchmarks due by March and June were completed. The only indicative target missed was protected social and priority spending.

The progress comes against a considerably stronger economic backdrop than Zimbabwe faced two years ago.

Real GDP growth accelerated from 1.7% in 2024 to 8.3% in 2025, exceeding the IMF’s earlier projection of 7.5%. The recovery was driven mainly by mining, high gold prices and a rebound in agriculture after the 2024 drought. The IMF expects the economy to grow by another 5% in 2026, followed by growth of about 4.2% over the medium term.

Inflation has also fallen dramatically from the hyperinflationary levels of previous years. Annual consumer price inflation was 4.7% in June 2026, while the IMF projects year-end inflation of about 8%.

The external position has improved as well.

Zimbabwe recorded a US$2.1 billion current-account surplus in 2025, equivalent to 3.6% of GDP, supported by gold exports and diaspora remittances. In the first quarter of 2026, exports increased by 58% year-on-year, driven by mining and agriculture, although imports also increased by 30%, reflecting higher fuel prices and demand for machinery and equipment.

But these gains have not removed the central constraint on Zimbabwe’s economic recovery.

The IMF continues to classify Zimbabwe’s external public debt as “unsustainable and in distress”, with the country still pursuing arrears clearance and debt restructuring as part of its broader re-engagement strategy.

The IMF’s projections show the scale of the problem.

Public and publicly guaranteed external debt is projected at about US$15.2 billion in 2026, with approximately US$11.8 billion represented by arrears. The arrears are projected to remain above US$13 billion by 2031 under the baseline projections.

This means Zimbabwe’s improved economic performance is taking place while a large portion of its external financial obligations remains unresolved.

The distinction is important because economic growth alone does not restore access to international capital markets.

Zimbabwe needs to rebuild a credible debt-service record, clear arrears and demonstrate that new borrowing can be managed sustainably before it can fully normalise relations with international creditors.

The IMF therefore places debt resolution at the centre of the country’s re-engagement agenda.

“Successful completion of the SMP is part of the authorities’ broader strategy to re-engage with the international community to advance external arrears clearance and debt restructuring,” the report says.

The fiscal position provides both evidence of progress and an illustration of the constraints.

Government revenue is performing substantially better than expected. The IMF projects US$10.3 billion in revenue in 2026, equivalent to 16% of GDP, above both the programme projection and the original budget. The stronger revenue performance is allowing the Government to target a cash primary surplus of approximately 1.7% of GDP and build a projected US$275 million cash buffer.

The proposed buffer is particularly significant because Zimbabwe is already being warned about another potential climate shock.

The IMF says a stronger-than-expected 2026/27 El Niño could reduce economic growth, lower revenues and force the Government to spend more on grain procurement to protect vulnerable households. The report estimates that a fiscal buffer of at least US$275 million, together with conservative 2027 budget planning, would allow the Government to respond to food-security pressures without creating new arrears.

That creates a difficult policy calculation.

The Government has to preserve the gains from fiscal consolidation while simultaneously finding resources for social protection, food security, infrastructure and debt obligations.

The tension was already visible during the first quarter.

Although the Government’s overall cash balance reached a US$304 million surplus, and the primary balance reached US$371 million, protected social and priority spending was US$84 million below the programme floor.

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

At the same time, the Government was paying substantially more than initially budgeted under its gold delivery incentive scheme.

Payments to artisanal miners reached US$118 million during the first quarter, rising to US$141 million by the end of April, compared with an annual budget allocation of only US$16 million.

The IMF has now recommended that the incentive be capped and reassessed.

The scheme pays incentives calculated as a percentage of the gross value of gold delivered, with rates of 5%, 7% and 9%, depending on delivery volumes. The IMF argues that this makes the fiscal cost open-ended because payments rise with both gold prices and delivery volumes.

The proposed 2026 ceiling is US$300 million, while the authorities are expected to assess whether the incentive remains necessary for formal gold deliveries in the 2027 budget.

This is one of the more important fiscal questions emerging from the review because gold has simultaneously become one of Zimbabwe’s biggest economic strengths and a source of fiscal exposure.

High gold prices have supported exports, economic growth and foreign-currency inflows. But the IMF is questioning whether the Government needs to continue providing such a costly incentive when gold buyers are offering world-aligned prices, settlements are being made in US dollars and there is no evidence of payment delays.

The country’s financial system has meanwhile remained relatively resilient.

The banking sector’s capital adequacy ratio stood at 23% in March, substantially above the regulatory minimum of 12%, while the non-performing loan ratio was 2.6%. However, the IMF noted that watch-listed loans were considerably higher at 9.8%, suggesting that some credit risks remain beneath the headline NPL figure.

Monetary conditions have also remained tight.

The Reserve Bank reduced its policy rate from 35% to 30% in June, but real lending rates remain high and ZiG credit has remained flat while US-dollar lending expanded. About 80% of banking-sector deposits are denominated in US dollars, highlighting the continuing importance of foreign currency in the financial system despite efforts to strengthen the domestic currency.

The exchange-rate environment is more stable than in previous periods, but the parallel market has not disappeared.

The IMF estimates that the gap between the official and parallel exchange rates narrowed from around 19% at the beginning of 2026 to about 16% in the latest data. Meanwhile, Reserve Bank sales to the willing-buyer-willing-seller market accounted for roughly 80% of transactions during the first five months of the year.

This indicates that exchange-rate stability has not yet been achieved solely through market forces.

The IMF has therefore called for continued monetary discipline alongside a broader strategy for foreign-exchange liberalisation and reform of the intervention framework.

The country’s improved fiscal numbers are consequently occurring alongside several unresolved structural problems: external debt distress, arrears, limited fiscal space, high dependence on foreign-currency financing, and the need to rebuild confidence in the monetary and financial system.

The IMF projects that past expenditure arrears amounted to approximately US$1.7 billion, or 2.9% of GDP, in 2025, and says these are expected to be cleared progressively through 2030. But continued financing constraints and the end of the partial moratorium on domestic debt service will limit fiscal space.

Zimbabwe is therefore entering the next phase of its stabilisation programme with a stronger macroeconomic base but a much harder structural task.

The immediate objective is no longer simply to stop economic deterioration. It is to convert lower inflation, stronger revenue collection, rising exports and fiscal discipline into the conditions required for debt resolution and normal access to international finance.