Zim Passes Another IMF Review — Now the State Must Make Room for Markets

By Tinotenda Bhunu

HARARE – ZIMBABWE has cleared another IMF checkpoint. But tucked inside the good news is a warning that says more about the country’s economic problem than the headline numbers do.

On September 17, the International Monetary Fund announced that its staff had reached a staff-level agreement with Zimbabwe on the second review of the country’s 10-month Staff-Monitored Program. IMF Management still has to approve it. According to the Fund, Zimbabwe hit every quantitative and indicative target through June 2026 except the one for protected social and priority spending.

The rest of the picture looks solid. The economy grew 8.3 percent in 2025 and is projected to grow 5 percent this year. Inflation dropped to 2.9 percent in August, revenue collection beat expectations, and the current account should stay in surplus. On the surface, that’s a stabilisation story.

There’s another story underneath, though. Government collected more money than expected, yet fell short of getting some of the funds meant for priority programmes to their intended recipients. That isn’t just a technical Treasury headache. It points to a bigger question about how Zimbabwe’s economy is organised. What happens when the state tries to run an economy through allocations, controls and administrative decisions, while the information those decisions depend on is scattered across millions of people and businesses? That’s where Zimbabwe’s next economic test begins.

A budget tells us what government intends to spend. It can’t tell us whether that spending will create value, and the difference matters. Government can put money into agriculture, but it won’t know in advance which farmer has the best idea, which crop will see the strongest demand, which input is about to run short, or where the next profitable opening will appear. It can put money into industry, but it can’t know which entrepreneur will find a better way to produce something, or which way consumer tastes will shift next year. Markets are how those things get discovered.

Here’s the core of the problem: economic knowledge is dispersed, and no central authority holds everything it would need to coordinate an economy efficiently. Prices solve part of that. When a commodity gets more expensive, that tells everyone something about scarcity and demand. Entrepreneurs respond, consumers adjust, producers hunt for substitutes, and capital moves. The price system isn’t perfect, but it does something planning struggles to copy. It pulls together information that no single planner has.

So Zimbabwe’s challenge can’t be boiled down to whether Treasury collects enough revenue or whether the IMF likes the fiscal targets. The bigger question is whether the system lets millions of individual decisions coordinate production and investment.

Zimbabwe badly needed macroeconomic stability, and there’s no virtue in romanticising instability. When prices swing unpredictably, contracts get hard to enforce, businesses shorten their planning horizons and households watch their purchasing power drain away. That’s why the IMF’s report matters. Inflation at 2.9 percent is a world away from the monetary chaos Zimbabwe has lived through before.

But low inflation should be a foundation, not a destination. Once the fire is out, the real question is what we build on the ground that’s left. That’s where the next phase of policy needs to be more ambitious. The country should stop asking how much government can control, and start asking how much economic decision-making government can safely leave to the people who actually have the relevant information. In practice, that means fewer unnecessary controls, more predictable rules, and stronger protection for property and contracts.

In a heavily administered economy, the entrepreneur is in an uncomfortable spot. He or she has to decide without knowing the future. Should I open a factory? Import machinery? Hire ten workers? Build rental property? Expand production? Keep my savings in local currency? Nobody has perfect answers. The entrepreneur acts on expectations.

That’s why policy uncertainty costs so much. If a business can’t predict the tax regime, the exchange rate rules, the licensing requirements or its access to foreign currency, it’s perfectly rational to put investment off. This doesn’t necessarily mean the entrepreneur lacks confidence. The information in front of them may simply be telling them that waiting is safer. So government doesn’t have to “create” every investment. Sometimes it just needs to stop making investment harder than it has to be.

Currency works the same way. The IMF says the Reserve Bank of Zimbabwe should keep monetary policy tight until inflation expectations are firmly anchored and confidence in the ZiG grows. That acknowledges a simple reality: you can’t order people to trust money. Credible policy can encourage them to use it, but in the end money is valuable because people expect others to accept it and expect its purchasing power to hold up reasonably well.

This is why an electronic foreign-exchange trading platform could matter. A transparent market lets information about supply and demand show up in prices. The aim shouldn’t be to engineer a particular exchange rate. It should be to create conditions where the rate can communicate honestly. If foreign currency is scarce, the price should say so, and if supply improves, the price should reflect that too. When authorities suppress those signals for too long, the scarcity doesn’t go away. The signal just turns up somewhere else, in premiums, parallel markets, shortages, queues and other distortions. Zimbabwe has lived through enough of this to know what it costs.

The same thinking applies to government spending. Spending can raise measured economic activity, but spending on its own isn’t wealth creation. Wealth comes from producing goods and services people actually value. If government builds something people need, and it expands productive capacity, there can be a real return. But if resources go into projects because they’re politically convenient rather than economically worthwhile, you get activity without lasting wealth.

That’s the problem of malinvestment — capital sunk into projects that don’t create value. Capital is scarce, and once it’s tied up in an unproductive project, it can’t also be used for a productive one. Zimbabwe needs to be much more demanding about public investment. Before committing scarce public resources, government should ask what problem the project solves, what economic value it will create, what would happen if the private sector were allowed to provide it, and what the opportunity cost is.

That last one gets forgotten a lot. Every dollar government spends is a dollar that can’t be spent elsewhere. Every worker on one project is unavailable to another employer. Every hectare given to one use carries a cost, and every borrowed dollar has to be repaid from future resources. Economics starts with recognising scarcity.

The IMF says Zimbabwe’s fiscal performance beat expectations because revenue collection was robust. That’s an opportunity, but stronger revenue shouldn’t automatically become a reason for government to grow. This is where fiscal discipline comes in. When more money arrives than expected, the first instinct should be to strengthen the balance sheet: build buffers, reduce arrears, make existing services more reliable, and leave room to respond to shocks. Where it’s appropriate, it should also ease the tax pressure on productive activity.

There’s a lesson in that too. Taxation changes incentives. A tax on an activity doesn’t just move money from the private sector to government, it can change whether the activity happens at all. A business that would have expanded at one rate may not expand at another. An entrepreneur who would have invested might hold off. A worker may decide the extra hours aren’t worth the marginal return. None of this shows up in a Treasury spreadsheet, because it’s about things that never happened. So the real cost of taxation isn’t always visible in the revenue collected.

The missed target on protected social and priority spending is another chance for reform. The answer shouldn’t simply be to demand that government spend more. It should be to make sure scarce resources reach the people they’re meant for. The Zimbabwe Social Registry could help here. Rather than spreading limited resources thinly across poorly targeted programmes, government can use better information to identify vulnerable households and direct assistance to them. That’s fiscally responsible and economically sensible.

The state has a legitimate role in protecting people from extreme shocks. But protection shouldn’t harden into permanent dependence. The goal is to help households get through shocks while creating conditions that let them return to productive economic life. The best social policy isn’t just a bigger transfer. It’s an economy where people have more chances to earn, save, invest and own assets.

This is probably where Zimbabwe needs to go further than the IMF programme itself. You can’t have sustained investment without confidence that people will be allowed to enjoy what that investment produces. Property rights aren’t a luxury for economists or lawyers. They’re economic infrastructure.

People improve a property when they’re confident they can keep it. A farmer invests in land when tenure is secure. A business owner builds when contracts and ownership are respected. An entrepreneur borrows and invests when the legal system offers credible protection. Secure property rights turn assets into capital, and weak ones leave assets economically underused. That’s why the next phase of reform shouldn’t stop at fiscal and monetary management. It should include a serious look at the institutional barriers stopping ordinary Zimbabweans from turning their assets, skills and ideas into productive capital.

Whenever an economy struggles, there’s a temptation to ask government to name the industries of the future. Sometimes governments get it right, but the risk is considerable, because officials don’t have the same information as entrepreneurs working inside markets. The official in the office may see a sector with potential. The entrepreneur sees customers, the investor sees risk, the worker sees wages, the consumer sees prices and the supplier sees costs. Each holds a small piece of what’s needed to coordinate the economy.

So the state’s most useful role is often not to pick winners, but to set the rules under which people can find winners for themselves. Protect property. Enforce contracts. Keep money stable and taxes predictable. Cut unnecessary licensing, allow competition, publish reliable information, and make it easy to start and close a business. Then let people act. That isn’t government doing nothing. It’s government doing the things only it can credibly do, and leaving the rest to society.

Zimbabwe has made progress, and the latest IMF assessment confirms it. But an IMF review can tell us whether a government met its programme targets. By itself, it can’t tell us whether Zimbabwe has built a dynamic economy. For that we have to look beyond the programme, and I’d suggest the next phase focus on five things.

First, protect fiscal buffers. Stronger revenue should reinforce the state’s financial position rather than automatically fund new commitments.

Second, make spending transparent. Publish regular data on what was budgeted, what was released and what was actually spent on protected and priority programmes.

Third, deepen market-based foreign exchange. The electronic FX platform should strengthen price discovery and transparency, not turn into one more tool for administrative allocation.

Fourth, lower the barriers to private investment. Simplify licensing, make regulation more predictable, and enforce contracts and property rights more firmly.

Fifth, put public investment through opportunity-cost tests. Every major project should show the productive value it’s expected to create, and the alternatives given up by committing scarce resources to it.

What these reforms share is that they don’t require government to know everything. They require government to accept that it can’t. That’s the intellectual shift Zimbabwe needs. The state doesn’t have the knowledge to centrally plan the millions of economic decisions that households, farmers, workers, traders and entrepreneurs make every day. Neither does the IMF, and neither does any economist. That knowledge lives in society, spread among people who are constantly making choices. Markets coordinate much of it through prices, profits, losses and voluntary exchange, and economic policy should make that process work better instead of replacing it without good reason.

Zimbabwe’s IMF test is moving into its next stage. The first task was stabilisation. The next is discovery. Let entrepreneurs find opportunities and consumers decide what’s valuable. Let prices signal scarcity and competition discipline producers. Let profit reward good decisions and losses correct bad ones, and let government focus on the institutions that make all of that possible.

Zimbabwe doesn’t need another economic system built on the promise that everything can be planned from the centre. It needs an economy where millions of people are free to make decisions, take risks, own property, enter markets and build something of their own. The IMF may help Zimbabwe restore credibility, but prosperity will ultimately have to be discovered by Zimbabweans themselves.

Tinotenda Bhunu is an economist by profession. LinkedIn: https://www.linkedin.com/in/tinotenda-bhunu-114645208?utm_source=share&utm_campaign=share_via&utm_content=profile&utm_medium=android_app