By Everson Mushava
UNCERTAINTY in Zimbabwe’s sharply deteriorating economy is set to deepen poverty and force government into high social spending if it fails to address the currency distortions rocking the market, the World Bank has said.
World Bank senior economist Stella IIieva said this while addressing an Economic Outlook Symposium during the 2019 Manufacturing Sector Survey launch held by the Confederation of Zimbabwe Industries (CZI) in Harare last Friday.
In her presentation titled The World Bank Outlook on Zimbabwe in the context and of the Regional and Continental Outlook, IIieva noted that Zimbabwe has experienced an economic decline over the years and with the prevailing currency distortions, its future was uncertain and this could lead to further economic collapse and massive poverty.
“Before 2019, the economy was growing faster than the regional peers, but GDP [gross domestic product] has fallen by 7,5%, this entails that uncertainty about Zimbabwe’s economic outlook is very high,” IIieva said.
“The economic outlook for Zimbabwe is likely to further deteriorate, requiring more social spending.”
Zimbabwe has been experiencing a debilitating economic meltdown for the past decade, which worsened soon after President Emmerson Mnangagwa took over from his predecessor, the late Robert Mugabe in a November 2017 coup.
A series of monetary statements by Finance minister Mthuli Ncube have plunged the country into more currency distortions characterised by hyperinflation and extortionate prices of goods against sub-economic salaries.
The fast-deteriorating economic situation in the country has threatened Mnangagwa’s rule at the time he is battling a legitimacy crisis after opposition leader Nelson Chamisa refused to accept his narrow electoral victory in the July 2018 presidential election.
IIieva said government should stabilise prices as well as remove foreign currency distortions to mitigate the economic impact on the poor.
“Addressing price instability and distortions in the forex exchange market will be key to growth prospects, boosting firm productivity, enhancing trade openness and integration, mitigating the impact of the extreme weather, economic adjustments on the poor and it’s important that the poor have access to food and education,” she said.
The government last year introduced austerity measures under the Economic Stabilisation programme, which according to Ncube was supposed to bring about prosperity through curtailing public sector spending.
However, Ncube’s economic programmes have brought about much suffering, and in the face of another drought, government spending on social services such as food relief is set to increase, further hampering economic growth.
Ncube, represented by the acting director of economic affairs in the Finance ministry, Elson Chuzu, claimed the country recorded economic growth under the Transition Stabilisation Process (TSP).
“We have recorded a lot of surplus under the Transitional Stabilisation Programme, but have invited a lot of debate. First part of the TSP was accounted with austerity and the stage is now behind us. This year, we should see stabilisation in the economy as we have planned,” Ncube said.
Mnangagwa has repeatedly called for patience throughout his turbulent rule, claiming he was undertaking both economic and political reforms to take the country forward. — Additional reporting by https://spotlight.co.zw