Roundup: Zimbabwe to cut 2022 growth forecast amid skyrocketing inflation

by Gretinah Machingura

HARARE, June 27 (Xinhua) -- Zimbabwe will slightly lower its economic growth forecast for 2022 following economic challenges that have been spawned in part by the Russia-Ukraine conflict, Finance Minister Mthuli Ncube said Monday.

The minister had initially forecasted the economy to grow by 5.5 percent this year but he said this will now be lowered when he presents the mid-term fiscal policy statement in July.

"As is the tradition, we are going to announce the revision during our mid-term budget review statement in July, suffice to say that we will announce a slightly lower growth rate than the 5.5 percent," Ncube said during a press briefing to announce economic measures to stabilize prices.

He said the revision has been necessitated by the disruptions that are happening in the economy seen in rising inflation, and food and fuel prices.

The country's annual inflation surged to 191.6 percent in June from 131.7 percent the previous month, while monthly inflation accelerated to 30.7 percent from 21 percent in May.

While the economy was already beset with its own challenges that include an insufficient foreign currency, which has led to the sharp depreciation of the Zimbabwean dollar in recent months, the Russia-Ukraine conflict has also worsened the country's economic situation through increased food and fuel prices.

"There is uncertainty everywhere in the global economy. The global economy is facing challenges around inflation, food, fuel and fertilizer. And Zimbabwe is no different," the minister said.

He said the measures that he announced Monday to increase grain supply on the local market, including allowing millers to freely import wheat, as well as cushioning civil servants from the high cost of living by increasing their salaries and giving them non-monetary benefits, were all aimed at tackling the economic challenges and bring relief to citizens.

Ncube said the government will promulgate a Statutory Instrument (SI) to give legal effect to the multi-currency system prevailing in the economy, which came after the government in 2020 allowed people with free funds to use their foreign currency to pay for goods and services for easier transactions following the outbreak of the Coronavirus pandemic.

Since then, the U.S. dollar has been circulating alongside the Zimbabwean dollar which was reintroduced in 2019 after the government banned the use of the multiple currency regime that had been in existence since 2009.

"We are basically entrenching the multi-currency system that is already in place. We want to advise the public that the use of the U.S. dollar will continue for the duration of the NDS 1 period. We want to provide assurance that there is no reversal of policy around this measure that we have adopted. It will continue and we want to buttress it," he said.

The National Development Strategy 1, running from 2021-2025, is Zimbabwe's new economic blueprint that aims to achieve an economic growth rate of 5 percent per annum to catapult the country into an upper-middle-income economy by 2030.

George Guvamatanga, the permanent secretary of the Ministry of Finance, said the current legislative framework does not fully entrench the use of the U.S. dollar, hence the need for the new SI. He said the Zimbabwean government does not have sufficient U.S. dollars to sustain dollarization, hence the use of both the Zimbabwean dollar and U.S. dollar will continue for the next foreseeable future.

Zimbabwean dollar transactions constitute 70 percent of the national payment system, and 30 percent are in U.S. dollars, while government revenue also follows the same ratio of 70 percent in Zimbabwean dollars and 30 percent in U.S. dollars.

"The figures are showing us that the majority of Zimbabweans prefer transacting in the Zimbabwean dollar. So it is clear that we do not have enough U.S. dollars to cause us to want to dollarize," Guvamatanga said.

Article type: free
User access status:
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In World

Ukraine calls on world to 'show strength' after shelling near nuclear plant
Roundup: U.S. monkeypox cases on sharp rise as media blame government's setbacks in containing outbreak
U.S.-listed Chinese firms trade mostly higher
U.S. stocks rise following upbeat week
Al Qaeda affiliate claims it killed four Russian mercenaries in Mali
U.S. agricultural futures fall
Feature: "Ferragosto" finds vacationers in Italy unperturbed by heatwaves, fuel costs
Setbacks in Biden administration's response allow monkeypox to gain foothold: media
Oil prices drop amid demand worries, dollar strength
Monkeypox another global health crisis fueled by U.S. governmental neglect: media

Others Also Read