ZIMBABWE’s economy remains firmly on track to meet the 5.5% growth target this year despite significant headwinds from rising inflation, recent currency volatility and geopolitical tensions in Europe which are fueling global inflation, said the Minister of Finance and Economic Development, Professor Mthuli Ncube.
Authorities warned last week that they were ready to deal decisively with malfeasance in the financial sector and restore common sense to the market.
The economy is estimated to have grown by 7.8% last year, boosted by huge public infrastructure projects and a bumper harvest after good rains.
But the resurgence of inflationary pressures and the rapid depreciation of the Zimbabwean dollar on the parallel market, as well as shocks from the impact of the Russian-Ukrainian conflict, have led some economic analysts to believe that the planned growth target may be missed. .
Annual inflation rose to 96.4% in April from 74.6% in March, driven by the weakening of the local currency, which now trades at $275/US$1 in the interbank market and at $173/US$1 on weekly auctions.
But the Treasury maintains that the country’s economic fundamentals – including a current account surplus, balanced budget, tight monetary policy and strong export performance – remain strong.
Despite attacks on the local currency by speculative currency and stock trading, the economy, Minister Ncube said, was not in crisis.
He said Zimbabwe was not the only country facing rising inflation, but said domestic factors had also worsened an already fluid situation following disruptions to global supply chains.
“So all of this is putting pressure on all emerging markets and transmitting global inflation to emerging markets, but of course we have domestic issues that we are also facing here in Zimbabwe,” Professor Ncube said in a statement. interview with ZTN.
“Looking at our fundamentals, let’s start with the trade picture, it’s pretty neat. Exports are stable and exporter inflows are at an all-time high – almost US$10 billion earned last year and US$2.5 billion US dollars in the first quarter of this year alone.
“And our current account is in a positive position; it is in excess. You look at the budget situation, it’s just as solid, we easily balance our budget year after 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, but we see the parallel market rate doing rage as he did.
Speculative behavior and lingering fears associated with the hyperinflationary era, he added, are eroding trust in the local unit and driving arbitrage in the economy.
“But there is also a lot of rent-seeking or indiscipline in the market,” he said.
When asked if the economy was not in crisis, he replied: “No! It’s not in crisis.
Our projection is very strong, we still expect growth closer to the 5% we projected (earlier), we can temper that but we still see a positive recovery in the economy, which started in 2021.”
The Treasury chief said the indiscipline needed to be addressed urgently.
“We will make sure to apply the measures we have put in place to deal with this indiscipline.”
President Mnangagwa recently announced a series of measures to defend the Zimbabwean dollar.
Measures include a ban on bank lending, the introduction of a 4% tax on US dollar transfers, a 40% tax on shares sold within 270 days, a ban on transfers between sub-accounts brokers and clearing the backlog of currencies at auction and using the interbank rate for pricing.
The government has since launched inquiries into the extent of malfeasance, particularly by banks.
“First of all, we have information, leads, on the type of speculation that was taking place in the stock market and also through the banking sector; that is why we have stopped bank lending for now, temporarily,” Minister Ncube added.
“We have started the investigation process, we have not yet filed a complaint, we are still investigating. Once we have completed these investigations and determined the level of wrongdoing, we will file the charges.
Last week, the Financial Intelligence Unit (FIU) of the Reserve Bank of Zimbabwe announced that it would audit banks’ suspense accounts, including accounts used by banks for internal business, amid strong suspicions that they were used to trade foreign currency. Confederation of Zimbabwe Industries (CZR) Chairman Mr Denford Mutashu said the measures announced by President Mnangagwa would restore sanity to the economy by curtailing activities widespread speculation. – Sunday Mail