HARARE – Finance Minister Mthuli Ncube has projected that Zimbabwe’s economy will grow by 5.5% in 2022 compared to 7.8% this year, boosted by strong growth in manufacturing, mining, construction and agriculture sectors.
Zimbabwe’s yearly inflation will likely top 60%, central bank governor, John Mangudya, said after this month’s monetary policy committee meeting which has been preceded by a sudden bout of price increases in the past few months.
The committee, at its meeting on 3 December, maintained the bank policy rate at 60% and statutory reserve requirements for demand deposits at 10%, Mangudya announced in a statement Tuesday. It also kept reserve money growth targets at 10% for the current fourth quarter.
These decisions are all in a bid to support the local currency and tame inflation which had started to bolt following successive months of decline. Zimbabwe’s local currency, the Zim dollar, has haunted businesses, especially exporters in the mining sector who have to surrender 40% of their income for liquidation at the official exchange rate.
“The recent monetary policy measures had reversed the upward trend on month-on-month inflation which rose from 4.2% in August to 6.4% in October 2021 and accelerated to 5.76% in November 2021. It was expected that annual inflation would end the year 2021 at between 58% and 60% and at less than 20% in 2022,” said Mangudya.
The IMF in November noted the government’s “significant efforts to stem inflationary pressures” pointing to “contained budget deficits and reserve money growth, higher monetary policy rates, and more flexibility in the RBZ auction exchange rate” as policy measures in the right direction.
The global lender however laid out key priorities related to monetary authorities in Zimbabwe allowing for greater official “exchange rate flexibility” and “tackling FX market distortions”.
These have to be “accompanied by an appropriate monetary stance, creating fiscal space for critical spending” and containment of fiscal deficits.
According to the central bank of Zimbabwe, the Southern African country will hold its last foreign currency auction for SMEs and large businesses for 2021 on December 14 before resuming on January 11 next year.
The central bank will closely “monitor developments on broad money to minimise its possible destabilising effects on inflation and exchange rate” movements.
Analysts at Africa Risk Consulting say the “moderate economic recovery in 2021 has helped Zimbabwe to rebound from worryingly high inflation” levels in 2020. The year 2022 will meanwhile see “heightened attention on President Emmerson Mnangagwa and Zanu PF in the run up to the 2023” elections.
Finance Minister Mthuli Ncube has projected that Zimbabwe’s economy will grow by 5.5% in 2022 compared to 7.8% this year, boosted by strong growth in manufacturing, mining, construction and agriculture sectors.