What the IMF's Second Review Settled for Zimbabwe, and What It Left Open

On 7 October, IMF Management approved completion of the second review under Zimbabwe's ten month Staff Monitored Programme. The Fund reported that all end June quantitative targets, structural benchmarks and continuous commitments were met, and that every indicative target was observed except the floor on protected social and priority spending, which was missed because of implementation bottlenecks. It projects real growth of 5 percent in 2026, easing to 3.5 percent in 2027 on expected El Niño drought effects, with annual inflation expected to remain in single digits this year. The headline is a clean delivery record, and the more useful question for an investor is what a delivery record on a monitored programme actually buys, and what it leaves for the next stage.

Start with what the review settles. A Staff Monitored Programme carries no financing, so its value lies in the track record it builds, and that record is now two reviews long. Meeting the quantitative targets matters because they cover the areas where credibility is hardest to earn, namely monetary discipline, the fiscal balance and the build up of reserves. Revenue came in ahead of expectations, producing a stronger primary balance than programmed, and on 28 September the Reserve Bank cut its policy rate from 30 percent to 27.5 percent, describing the move as a realignment to observed inflation dynamics while keeping a restrictive stance. Local bank research puts gross reserves at nearly US$2 billion, up from US$1.4 billion in June.

The pattern worth noticing is that policy easing and a programme review are arriving together. Annual ZiG inflation rose from 2.9 percent in August to 3.7 percent in September, still low, but the direction is a reminder that the pace of easing deserves the same care that the tightening received. A policy rate of 27.5 percent against inflation of 3.7 percent leaves a real rate of about 24 percentage points, so there is room to ease further, yet the Fund's guidance is to keep a tight stance, strengthen liquidity management and develop market based instruments. The sequencing of those three is where investors in short dated paper should focus.

What the review leaves open is equally instructive, and the Fund is explicit about it. The programme supports Zimbabwe's renewed engagement with creditors and development partners, but it does not itself provide financing, and the Fund calls for a credible, fully financed approach to clearing arrears and resolving debt, without setting out amounts or timelines. It also asks for reconciliation of debt data, which is the unglamorous prerequisite for any creditor conversation. On the exchange rate, the Fund welcomes progress toward a more transparent trading platform and asks the authorities to prepare a sequenced strategy for a gradual move to a more market based system. Each of these is a milestone that can be observed, which is precisely what makes them useful to an investor.

The 2027 National Budget, which the Minister of Finance presents to Parliament on 19 November, is the first practical test of the Fund's advice. The IMF has encouraged the authorities to use revenue gains to build buffers, to anchor the budget in prudent assumptions, to protect priority social spending and to tighten expenditure controls and liability management. With growth expected to slow to 3.5 percent in 2027 under drought risk, the assumptions behind the revenue line will matter as much as the spending allocations.

For portfolio construction, the practical reading is measured. A completed review supports the case that Zimbabwe's macroeconomic framework is being built on observable delivery rather than announcement, and it narrows the range of outcomes for short dated local currency instruments. It does not, on its own, change the position on external debt, where the arrears question remains the governing issue. We would watch three things over the coming months: whether delivery on the remaining commitments continues, how the 2027 Budget handles its financing mix, and whether the move toward a market based exchange rate is sequenced in a way that preserves the stability the programme is meant to protect. Investors who track those three are following the same evidence the Fund itself will use at its next review.