Treasury sticks to growth projections
ZIMBABWE is in no rush to lower its economic growth and inflation expectations for 2021, Finance minister Mthuli Ncube says, despite the grave risk brought by turmoil on the world markets. Government has projected economic growth of 5,5% this year and inflation of up to 35% by year end.
These targets were already in doubt at the time they were made, and now look even less likely as the cost of oil and other key imports have gone up due to the Russia-Ukraine war. But Ncube insists he is not making any downgrades yet.
“We are not rushing to revise our inflation or growth figures,” Ncube said yesterday from Dubai.
“I think the May (oil) futures contracts are US$112 per barrel, so we will watch those numbers. We are not rushing to revise inflation or growth figures.”
The World Bank sees much lower growth of below 4,3%. A recent Old Mutual report forecast inflation at above 105% by year-end.
Transportation is the biggest driver of inflation, and higher fuel prices, which recently rose sharply twice in a week, are expected to exert more pressure on inflation, already being carried by the Zimbabwe dollar weakness. Ncube believes a small cut on fuel levies will lighten the impact.
He said: “We will continue to watch and act appropriately in terms of our subsidy programme which we are running by controlling or changing the fuel levies that we levy on the fuel price. We will make the appropriate announcement when we make any changes of outlook or on growth, inflation, or other variables.”
Part of the moves on fuel includes a cut on fuel levies.
“We have run our calculations and strategies. We have actually been running this subsidy for five months.
“The way we have done it is reducing the fuel levy from US12,7 cents per litre to US8,7 cents.
“So we have been playing around to make sure that we lower the surge in the fuel price,” Ncube said.
However, that tax cut has not been enough to cushion the economy from fuel costs, which are the highest in the region.
At the weekend, President Emmerson Mnangagwa ordered further fuel tax cuts. No detail has been given on this plan.