Finance minister Mthuli Ncube says Zimbabwe’s economy will flat-line this year, narrowly skirting recession in the face of growing headwinds.
Initial forecasts had suggested that the economy would grow by an average of about 4% this year, but with most indicators pointing southwards halfway through the year, market watchers have revised their positions.
The International Monetary Fund (IMF) actually suggests that the economy might contract by as much as 5,2%.
Ncube told Standardbusiness on the sidelines of an Alpha Media Holdings (AMH) event dubbed In Conversation with Trevor last Wednesday in Harare that the economy had shown resilience to weather the cloudy outlook.
The question-and-answer session was anchored by AMH chairman Trevor Ncube.
“We are not expecting much in terms of growth because the facts on the ground speak for themselves,” the minister said.
“The drought is quite serious; we are having to import grain, mineral revenues are flat and power outages are hindering productivity, so clearly growth will be impacted.
“But at the same time Zimbabwe has shown great resilience. last year we thought growth was down, then we were surprised that we recorded 6% growth in real terms even in the middle of that chaotic last quarter. but that was the economy adjusting, demand was still present, in fact, increasing although speculative in nature, so growth held up.”
Zimbabwe is experiencing one of its worst droughts on record, which has left close to six million people in need of food aid after widespread crop failure.
Official estimates put maize production for the 2018/19 season at around 776 600 metric tonnes, which is less than half of last season’s yield.
Government has already indicated plans to import up to 700 000 tonnes of maize to fill the national shortfall.
However, foreign currency shortages will likely limit imports by both the government and private sector.
A disastrous episode of flooding in the eastern part of the country in March has also added to the country’s mounting woes.
Despite the seemingly insurmountable challenges, which include an acute power shortage that has seen the power utility implement an aggressive load-shedding regime, Ncube said he was confident that the country would turn the corner after the reform programme comes into full effect.
Last October the government launched an ambitious 15-month plan called the Transitional Stabilisation Programme (TSP), which includes initiatives to restore order to public finances after years of fiscal slippage and address chronic external imbalances that have left Zimbabwe with excessive debt and extreme foreign currency shortages.
Ncube said as part of the TSP, the extent of government waste had come down as a result of a rebalancing of the fiscal policy resulting in a surplus position.
“The biggest challenge was the fiscal position,” he said.
“We are now paying civil servants on time. My message of austerity for prosperity was a message for government that we need to live within our means.
“We are monitoring our travel and vehicle usage.
“Once we were convinced that we had put a lid on that, we moved onto the monetary side and addressed the currency.
“We are very unlucky with the drought, imagine if we had not had a drought.”
He said government was channelling its surplus towards the provision of social safety nets for vulnerable communities.
“Our deficit target is 5%, so we have a lot of room to move from a surplus down to a budget deficit, so we are going to spend that money on social services,” Ncube added. – The Standard