What is clear is that the Zimbabwean economy remains at the crossroads or in the twilight
zone-the status quo has been dismantled but the future remains uncertain, the inflationary
pressures that the country is facing are probably the biggest and the latest thorn in the flesh for a government that is making frantic efforts to resuscitate an embattled economy…Writes MVELO NGWENYA.
I walked into a fast food outlet to buy some fresh chips and was greeted by a friendly member of staff, a
young lady at the counter. With my debit card in hand, I called out “chips please”. “Ok”, the lady responded
“But I must tell you that they are now two dollars”, she added, “Two dollars?” I replied surprised, “Yep!”, she
replied. I hesitated for a couple of seconds before proceeding to say “Ok will have them” I said.
Like the cyclone that hit the country earlier this year, the rate of inflation spurred by the free fall of
the local currency against the US dollar has been gathering momentum with devastating results. This
comes in the wake of a presentation given by the country’s finance minister at the National defense
university in which he warned that the country may not be able to recover without paying the price
through hard and painful measures. The Treasury boss has been on record as saying the country will
inevitably experience significant economic turbulence, as the government rolls out interventions to
stabilize the economy.
Statistics show the rate of inflation at 75% for the month of April 2019, the highest it has reached since
2008 when inflation reached an estimated 500 billion percent. Food inflation was at 92% and the
consumer price index was up 110 from 104, according to one source. The prices of most basic
commodities are now beyond the reach of the majority of citizens. In spite of all of this, the officials
from the Treasury expect the figure to come down later this year due to the slowdown of the money
growth supply and the on-going efforts to narrow down the trade deficit. Officials from the Central
Bank and industry contend that the parallel market rates are not sustainable and therefore expect
the rate to recalibrate to more realistic figures of around 4-5 against the US dollar, by the time of
writing, the rate which had surged to around 9 had pulled back and was playing around 5-7.5 against
the USD. However economic growth which had been projected to reach 4% by the African
Development bank has been revised down to more modest levels of 3% by the economists from the
treasury due to drought and other challenges.
According to the country’s Minister of Finance, the current inflationary pressures that have resulted in
suffering and great anxiety amongst the population are but economic shocks resulting from the
the drastic shift of doing business by the government. “Reforming, restructuring, and rebuilding
the economy was always going to take time and any attempts to prematurely accelerate the process are
liable to cause greater upheaval and suffering” warned the minister in a piece he penned appearing
in the Newsday paper, a leading local tabloid in the country.
Eddie Cross, a leading economic commentator in the country has come out in full support of the
on-going economic reforms, arguing that the country’s macroeconomic fundamentals were on
a sound footing and that as a result the country and its economy were on the path to recovery. ”The
the underlying economy is actually fine, it’s growing, the exports are growing and the fundamentals are
strong…”. Mr. Cross has been quoted as saying, “The RTGS dollar is the strongest currency in the
region despite the challenges, proving that the economy is strong”.
Mr. Cross enumerated some of the positives that have so far been achieved by the Finance Ministry,
1) The creation of an interbank market for foreign exchange.
2) The resistance to institute price controls despite inflation.
3) Delinking of the USD accounts from RTGS accounts which resulted in an increase of USD
account balances from USD$200 million to close to USD$1 billion.
4) Elimination of fiscal deficit which in the past has been the main driver of inflation.
5) Impositioning on all government ministries and parastatals strict financial discipline and
controls in all expenditures including the policy not to purchase motor vehicles for all
members of parliament.
MR Cross insists that these are not small but giant steps that have been taken in very challenging
conditions. Mr. Ncube, the Treasury chief, however, while acknowledging the achievements, has
called for cautious optimism, saying, “These achievements should not give us the reason for back-patting and self-congratulations. These reforms are but one step in a much longer journey, and
will not mean anything if we do not finish the job “.
The country’s president ED Munangagwa, in a recent signing ceremony for a platinum concession
between the government and a mining corporation, was more bullish about the country’s future
prospects saying dawn is just kilometers away.” Prosperity for this country is there. All that we
need is peace and unity among our people. We must march forward together,” said the
president adding that those who did not believe in the coming economic prosperity of the
country will fall by the wayside.
Views and comments are welcome
Twitter @mvelongwenya .