Zimbabwe economy on track to recovery

Prof. Mthuli Ncube
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ZIMBABWE’s economy is on an assured path to recovery and growth, and many local companies have begun realising positive spin-offs that come with stability, Reserve Bank of Zimbabwe (RBZ) Governor Dr. John Mangudya has said.

He said this on Friday during a panel discussion on the Mid-term Monetary Policy review presented earlier this month.

Monetary authorities decided to keep policy pronouncements made in January intact.

Treasury had similarly maintained its policies and targets during the Mid-term Fiscal Policy Review.

Finance and Economic Development Minister Professor Mthuli Ncube revised the country’s economic growth forecast to 7,8 percent from the previous 7,4 percent made in the 2021 Budget in November.

A stellar agricultural season, a global commodities price boom, massive construction projects in the private and public sector, and improved electricity generation, among others, are expected to drive growth.

The International Monetary Fund and World Bank projected the country’s economy would rise by 6 percent and 3,9 percent, respectively.

According to Dr Mangudya, the country’s economy was headed in the right direction despite the impact of the coronavirus pandemic, which has disrupted global supply chains and affected production in various industries.

“The economy is on the move, we are on the great track to recovery, we are on the great track to rebounding the economy . . . corporates are enjoying,” Dr Mangudya said, adding key fundamentals supported his assertions.

“The fundamentals are clear, we have grown by 29 percent in terms of exports, the coverage ratio is higher under the auction than through FCAs (foreign currency accounts), than through the interbank market.

“To us you are criticising medicine that is helping the economy. It is also acceptable (though) because (similarly) we have some people who are criticising vaccines as if they have an alternative,” he said.

However, the global economy, which was initially anticipated to decline by 3,9 percent in 2020, is now expected to decline by 4,9 percent.

Dr Mangudya dismissed assertions that the backlog currency being experienced on the foreign currency auction system is proof that the platform was not working.

The auction, he added, was the only viable solution, accounting for the bulk of importers’ foreign currency needs.

The central bank also made a commitment to continue refining it to improve convenience.

Statistics indicate that the auction system has extended more than US$1,5 billion to 1 632 large corporations and US$172,8 million to SMEs since it was launched on June 23 last year.

The bulk of the funds — 70 percent — are going towards procuring raw materials, machinery and equipment.

The auction has managed to anchor exchange rate and price stability.

Inflation has been falling as a result, from a post-dollarisation high of 837,5 percent in July last year to 56,37 percent in July this year, its lowest point in two years.

Dr Mangudya said the bank expected inflation to maintain its downward trajectory towards the revised year-end target of between 25 and 35 percent, underpinned by a conservative monetary targeting framework.

He also noted that there was no relationship between the foreign currency backlog on the foreign exchange auction and parallel market exchange rate, citing existence of supplier-client credit arrangements.

This comes following reports in the market that glitches in settlement of bids approved at the forex auction, which should operate on a T+3 (three day) cycle, were driving beneficiaries to the open market to meet orders in time, which was pushing exchange rates higher. – Sunday Mail