IMF low­ers Zim GDP growth fur­ther

The Zimbabwe Independent - - FRONT PAGE - TATIRA ZWINOIRA

THE In­ter­na­tional Mone­tary Fund (IMF) says Zim­babwe’s econ­omy will con­tract by 10,4% this year, much higher than its ear­lier pre­dic­tion of 7,4%, but ex­pects a re­bound next year.

It also ex­pects the an­nual in­fla­tion rate to close the year at 495% and pre­dicts an eco­nomic re­bound of 4,6% next year.

A cock­tail of Covid-19 lock­down mea­sures, cur­rency volatil­ity, high in­fla­tion, wage ero­sion, short­ages of for­eign cur­rency, re­duced ca­pac­ity of busi­nesses, and com­pany clo­sures have quick­ened Zim­babwe’s eco­nomic con­trac­tion.

Mid-year, the World Bank an­nounced that it ex­pected a 10% con­trac­tion while the African De­vel­op­ment Bank (AfDB) pro­jected an eco­nomic de­cline of between 7,5% and 8,5% for Zim­babwe.

“In 2019 Zim­babwe au­thor­i­ties in­tro­duced the Real-Time Gross Set­tle­ment dol­lar, later re­named the Zim­babwe dol­lar, and are in the process of re-de­nom­i­nat­ing their na­tional ac­counts sta­tis­tics. Cur­rent data are sub­ject to re­vi­sion,” the IMF said in its new World Eco­nomic Out­look ti­tled A Long and Dif­fi­cult As­cent re­leased dur­ing the cur­rent An­nual Spring Meet­ings in the United States.

Re­spond­ing to the IMF down­grade, Fi­nance min­is­ter Mthuli Ncube dis­missed it as an “opin­ion” rather than a cer­tainty as Trea­sury has its own eco­nomic pro­jec­tions.

“I think we all agree that dur­ing this Covid-19 mo­ment, all the economies around the world have been im­pacted with­out ex­cep­tion. We have got the ex­cep­tion of China which has gone to show growth that is sort of breakeven in a way, but ev­ery other coun­try is in the neg­a­tive ter­ri­tory; so Zim­babwe is no dif­fer­ent,” Ncube said in re­sponse to ques­tions by this pa­per at a cab­i­net event on Wed­nes­day.

“We too are ex­pe­ri­enc­ing neg­a­tive growth, but our re­cent as­sess­ment shows that the sit­u­a­tion is not as bad as ini­tially thought. We had pro­jected a growth of -4,5%. Our teams are busy on the ground again try­ing to fur­ther an­a­lyse that growth.

“We also have our own num­bers. We have got our own batch of sta­tis­tics — we have got the cen­tral bank and Trea­sury who look af­ter th­ese num­bers. •ese num­bers are not im­posed on coun­tries by the way. It’s an opin­ion by just one in­sti­tu­tion out there, al­beit, an im­por­tant in­sti­tu­tion.

“I don’t want to get into a duel. All I am say­ing is that we have num­bers from the African De­vel­op­ment Bank, World Bank, IMF, ECA (United Na­tions Eco­nomic Com­mis­sion for Africa), OECD (Or­gan­i­sa­tion for

Eco­nomic Co-op­er­a­tion and De­vel­op­ment) and then we have got the Zim­babwe gov­ern­ment num­bers.

“So, you have about five sources of num­bers but they all point in the same di­rec­tion which is that this Covid-19 year has been tough and then it’s tough for ev­ery coun­try in the world in­clud­ing Zim­babwe so we don’t have to agree with any of them. But we make use of their in­for­ma­tion just in case we have missed some­thing in the way we ar­rive at our num­bers that’s all we do.”

He said gov­ern­ment num­bers were show­ing that com­pany earnings were quite strong and com­pany vol­umes were quite strong.

Ac­cord­ing to in­ter­na­tional fi­nan­cial in­sti­tu­tions (IFIs), pol­icy mis­steps — lack of ef­fec­tive fis­cal-mone­tary-forex pol­icy co­or­di­na­tion and sig­nif­i­cant quasi-fis­cal ac­tiv­i­ties by the cen­tral bank — un­der­mined the de-dol­lar­i­sa­tion ef­fort and re­sulted in a rapid de­pre­ci­a­tion of the lo­cal cur­rency and high in­fla­tion­ary pres­sures.

†e high in­fla­tion eroded dis­pos­able in­comes for mil­lions of the for­mal and in­for­mal work­ers thus de­press­ing do­mes­tic de­mand which has caused a slow­down in eco­nomic ac­tiv­ity.

For­eign cur­rency short­ages and Covid-19 lock­down mea­sures also re­duced the ca­pac­ity of com­pa­nies to im­port raw ma­te­ri­als and thus in­crease pro­duc­tion lead­ing to some com­pany clo­sures as well as de­pressed vol­umes. †e Zim­babwe Rev­enue Author­ity ex­pects a num­ber of com­pany clo­sures by year-end.

And while in­ter­ven­tions by the au­thor­i­ties to cur­tail par­al­lel mar­ket ac­tiv­ity like nearly cut­ting all agency mo­bile bank­ing, mak­ing firms liq­ui­date 20% of do­mes­ti­cally gen­er­ated forex and lim­it­ing daily trans­ac­tion lim­its have cur­tailed run­away in­fla­tion the econ­omy still re­mains volatile.

“†ough some sta­bil­ity in the of­fi­cial and par­al­lel mar­ket ex­change rates has largely curbed price volatil­ity on the mar­kets, some price in­creases of cer­tain goods and ser­vices con­tinue to be recorded,” USAid food se­cu­rity arm, FEWS NET, said in its Septem­ber 2020 update of Zim­babwe.

Fur­ther, dur­ing the pe­riod July 2019 and July 2020, gov­ern­ment in­curred a debt of US$2,23 bil­lion between July 2019 and July 2020 based off cen­tral bank sta­tis­tics. Of this debt, 80% is blocked funds from the pri­vate sec­tor, 10% is debt for ser­vices ren­dered to the gov­ern­ment dur­ing the pe­riod and the re­main­ing 10% is in­ter­est on ex­ist­ing debt owed to IFIs.

“I think the pro­jec­tion by gov­ern­ment has been overly op­ti­mistic. I think the re­al­ity of the sit­u­a­tion is that I think that there are sig­nif­i­cant struc­tural chal­lenges that we need to ad­dress be­fore we can go back to an era of pos­i­tive growth and ob­vi­ously that out­look has been af­fected, quite ad­versely, by the Covid-19 pan­demic,” econ­o­mist Pros­per Chi­ta­m­bara said in a re­cent in­ter­view with the South African news broad­caster SABC.

Econ­o­mists have ar­gued that sus­tain­able growth in the coun­try could only be seen af­ter the lo­cal and global Covid-19 re­stric­tions were fully lifted.

Con­fed­er­a­tion of Zim­babwe In­dus­tries tweeted on Monday: “#Sta­bil­ity is set­tling in and we must stay the course. Keep­ing our eye on the ball. Ideas and pol­icy op­tions wel­come.”

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