Treasury focussed on inflation, Zimdollar

TREASURY says it remains focused on reducing inflation and stabilising the exchange rate in its quest to achieve full macroe-conomic stability and attain the Government’s medium term targets.

Interventions to resolve teething issues will be critical to attainment of Government’s Vision 2030, Finance and Economic Development Minister Mthuli Ncube said in a presentation delivered on his behalf to officers at the Zimbabwe Staff College yesterday by Treasury’s chief director of communications, Clive Mphambela.

The Minister said macroeconomic stability was key in fostering business confidence, planning and investment as well as protecting the welfare of citizens, including the vulnerable.

The introduction of the auction system, which has disbursed more than nearly US$2 billion to key sectors of the economy, saw inflation fall from a post dollar regime era record of 837,5 in 2021 to 50,1 percent last year.

While the auction exchange rate has remained modestly stable, it has been activities on the parallel market that have threatened relative stability in the economy.

It remains perplexing though how the domestic currency continued to suffer bouts of volatility last year, especially on the alternative market, given the record forex inflows of nearly US$10 billion in 2021.

Inflationary pressures, emanating from pass-through effects of currency depreciation, especially driven by the parallel market, resulted in slight misses of inflation targets in 2022.

Minister Ncube acknowledged the need to enhance domestic production given its importance in steering Zimbabwe’s economy to the envisioned upper-middle-income status by 2030.

The past year saw marked progress towards strong economic growth, which manifested through increased capacity utilisation, increased exports which resulted in an import deficit of up to 4 percent.

The Reserve Bank of Zimbabwe (RBZ)attributed growth in domestic production in 2021 to improved foreign exchange availability from the auction system.

This has resulted in 80–85 percent of goods in retail shops in 2022 being produced locally, from about 65 percent in the third quarter of last year, as manufacturing capacity rose.

Minister Ncube noted lower inflation, a stable Zimbabwe dollar exchange rate and better ease of doing business conditions would inspire confidence in the economy.

“We are cognisant of broader issues which require holistic approach including enhancing domestic production, confidence issues and addressing the doing of business environment.
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“The attainment of vision 2030 is anchored on macroeconomic stability in terms of inflation and the exchange rate. This will be achieved through pragmatic and prudent fiscal and monetary policies supported by structural reforms and improved domestic production,” the minister said.

He said initiatives were being instituted simultaneously to improve the state of the country’s economy, further stressing that economic reform was not a process but an event.

“This will be achieved through pragmatic and prudent fiscal and monetary policies supported by structural reforms and improved local production,” he said.

The minister said 2022 would be the second successive year of the National Development Strategy (NDS1) and the Treasury was working on advancing value chains and value addition to spur economic growth and job creation.

Treasury, the minister promised, would continue to enhance the role of the private sector including small and medium-sized enterprises in growing and developing the economy.

He said NDS1, Government’s economic blueprint for the five-year-period to 2025, sought to consolidate and advance stabilisation and supply strides achieved under the Transitional Stabilisation Program (TSP) to give the economy momentum for growth, job creation, better competitiveness and economic resilience.

The World Bank says Zimbabwe’s economic growth is expected to strengthen in 2022 as the negative impacts of Covid-19 subside, rainfall levels remain good, and implementation of policies outlined in the NDS1 are accelerated.

Progress on the massive vaccination programme is expected to boost tourism, trade, transport, and other sectors that were negatively affected by pandemic disruptions.

2021 saw notable economic activity on the account of improved capacity utilisation which led to growth in the supply of local goods and services on the local market.-The Herald