‘Economy on course for growth’
ZIMBABWE’S economy remains firmly on course to achieve the targeted 5,5 percent growth this year despite significant headwinds from rising inflation, the recent currency volatility and geopolitical tensions in Europe that are stoking global inflation, Finance and Economic Development Minister Professor Mthuli Ncube has said.
Authorities warned last week they were prepared to decisively deal with malfeasance in the financial sector and restore sanity in the market.
The economy is estimated to have grown by 7,8 percent last year, spurred by massive public infrastructure projects and a bumper harvest following good rains.
But resurgent inflationary pressures and rapid depreciation of the Zimbabwe dollar on the parallel market, as well as shocks from the impact of the Russia-Ukraine conflict, have led some economic analysts to believe the projected growth target might be missed.
Annual inflation shot to 96,4 percent in April from 74,6 in March driven by the weakening local currency, which now trades at $275/US$1 on the interbank market and $173/US$1 on the weekly auction.
But Treasury maintains that the country’s economic fundamentals – among them a current account surplus, balanced budget, tight monetary policy and robust export performance – remain strong.
Despite attacks on the local currency from speculative trading in currency and equities, the economy, Minister Ncube said, was not in a crisis.
He said Zimbabwe was not the only country facing rising inflation, but indicated domestic factors had also compounded an already fluid situation in the wake of disruptions to global supply chains.
“So all that is putting pressure on all emerging markets and it is transmitting global inflation into emerging markets, but, of course, we do have domestic issues that we also grapple with here in Zimbabwe,” said Professor Ncube in an interview with ZTN.
“Looking at our fundamentals, let’s start with the trade picture, it’s quite sharp. Exports are steady and inflows from exporters are at the highest level – US$10 billion almost earned last year and US$2,5 billion just in the first quarter of this year.
“And our current account is in a positive position; it’s in surplus. You look at the fiscal
position, it’s just as strong, we are balancing our budget easily from year to year and continue to live within our means.
“If you look at the monetary sector, we have actually reduced the monetary target, M0, to zero percent per quarter for the rest of the year. So, our fundamentals are strong, yet we see the parallel market rate raging the way it has been doing.”
Speculative behaviour and lingering fears associated with the hyperinflationary era, he added, were eroding confidence in the local unit and driving arbitrage in the economy.
“But there is a lot of rent-seeking as well or indiscipline in the market ,” he said.
Asked if the economy was not in crisis, he said: “No! It’s not in a crisis.”
Our projection is very strong, we still expect a growth of closer to the 5 percent that we projected (earlier), we may temper that but we still see a positive upturn in the economy, which began in 2021.”
The Treasury chief said indiscipline needed to be urgently dealt with.
“We will make sure that we enforce the measures that we have put in place to deal with this indiscipline.”
President Mnangagwa recently announced a raft of measures to defend the Zimbabwe dollar.
The measures include a ban on bank lending,
introduction of a 4 percent tax on US dollar transfers, 40 percent tax on shares sold within 270 days, ban on transfers between brokers sub-accounts and clearance of auction forex backlog and use of interbank rate for pricing.
Government has since launched investigations into the extent of malfeasance, especially by banks.
“First of all, we have some information, some leads, as to the kind of speculation that was taking place in the equities market and also through the banking sector; that is why we have stopped banking lending for now, temporarily,” added Minister Ncube.
“We have started the investigation process,
we have not brought any charges yet, we are still investigating. Once we have completed those investigations and ascertained the level of wrongdoing, then we will bring the charges.”
Last week, the Reserve Bank of Zimbabwe’s Financial Intelligence Unit (FIU) said it will audit banks’ suspense accounts, including accounts used by the banks for their internal business, amid strong suspicion they were used to trade in foreign currency.Confederation of Zimbabwe Industries (CZR) president Mr Denford Mutashu said the measures announced by President Mnangagwa would restore sanity in the economy by curtailing widespread speculative activities.