Harare (New Ziana) – The International Monetary Fund (IMF) has applauded efforts by the Zimbabwe government to tame inflation and stabilise the foreign exchange market and urged sustained use of appropriate policies to maintain the trend.
Through a combination of monetary and fiscal policy instruments, the government managed to douse an inflation hurricane that had swirled in the country earlier this year.
For example, gold coins introduced by the central bank sucked out billions of dollars from the market which could have otherwise ended up on the parallel currency market, thereby driving up inflation.
It is such efforts that have won the government plaudits from the IMF.
In an end of visit report, team leader Dhaneshwar Ghura said annual inflation, which had increased to 285 percent in August 2022, was decelerating.
“Currency and price pressures, which emerged earlier this year largely owing to a spike in broad money growth and an official exchange rate misaligned with market fundamentals, are subsiding,” he said.
“The IMF mission notes the authorities’ efforts to stabilize the local foreign exchange market and lower inflation. In this regard, the swift tightening of monetary policy along with greater official exchange rate flexibility and a prudent fiscal stance are policies in the right direction and have contributed to a narrowing of the premium in the parallel foreign exchange market.
“In addition, the authorities have identified large payments to suppliers, the result of over-invoicing, as a source of pressures on the parallel market and in response have launched value-for-money audits and introduced measures to strengthen procurement regulations.”
Ghura said multiple external and internal shocks continued to weigh on Zimbabwe’s growth prospects, and sustained government efforts to deal with these should see the country through as was the case last year.
He said the government’s swift response to the Covid-19 pandemic, supporting businesses, livelihoods, and the health sector, resulted in robust growth of 8.5 percent in 2021, underscoring the economy’s resilience.
“Renewed domestic and external shocks (inflation surge, erratic rainfall, electricity shortages, and Russia’s war in Ukraine) are, however, adversely affecting economic and social conditions. Real GDP growth is thus expected to decline to about 3.5 percent in 2022,” he said.
Finance and Economic Development Minister, Mthuli Ncube expects the country’s economy to grow by 4 percent this year, down from 4.6 percent earlier predicted, due to strong global and domestic headwinds the economy has had to navigate in the course of the year.
But the downward revision still remains one of the strongest GDP growth rates in the world this year, a period global economies have faced severe challenges ranging from sharp commodity price increases in the aftermath of the Russia-Ukraine war, escalating inflation and interest rates in the developed world, and difficulties countries have generally faced globally to nurse economies back to health, post-Covid 19.
In advanced economies, for example, GDP growth is projected to slow down to 2.4 percent this year, down from 5.2 percent last year, while in the sub-Saharan region, this is forecast to drop to 3.6 percent, from 4.7 percent in 2021.