The Reserve Bank of Zimbabwe (RBZ) has ruled out any prospects of economic growth this year owing to a number of factors prevailing in the country.
For nearly two decades, Zimbabwe has been facing economic challenges that have severely fractured the country`s development prospects due to cash shortages, price hikes and corruption leaving a majority in poverty.
Making a presentation to exporters on the support offered to them by the central bank in Bulawayo Friday, Director of Exchange Control, Farai Masendu stated that in terms of economic growth, the outlook was not positive as expected.
“We don’t expect much this year as we focused that climatic shocks are going to clamp down on economic growth outlook. In terms of the current economy inflation trends, we have observed that since October 2018 on a year to year basis, the inflation rate has been going up,” he said.
The RBZ official said the highest inflation rate was experienced in April this year, as it had climbed 75.86 percent surging from 66.8 percent in March.
He however, said the central bank was encouraged to see that on a month to month basis, the inflation rate was actually taking a declining trend as it was still below 10 percent.
“Going forward we expect the decline to continue and that decline on a month to month is a positive signal which shows a disperse of inflationary pressures,” Masendu claimed.
In terms of challenges, the RBZ official confirmed the economy is still facing rampant pricing distortion across sectors from goods, to foreign exchange as well as labour.
“There is also low level of confidence across the economy and we are still experiencing low productivity and production. The major problem is sources of foreign currency and these forex shortages will still exist as long as we have low production and productivity in our economy,” he said.
Masendu highlighted the Zimbabwean economy was at the moment in a transition phase and is yet to fully to adjust to the recent thematic policy measures.
“But we have noted the economy has embraced fully the RTGS dollar as an official settlement and unit of account currency. We have seen bank balances, national statistics and accounting books now dominated in the RTGS dollar. However, activity on interbank market is still very low picking up gradually consistent with the growing exports in forex receipts from other sources.”
Due to the huge external debt overhang that the country has and still experiencing, Masendu said that limited foreign markets for international capital hence the country risk is very high.
“This inhibits attraction of foreign investment but let me hasten to say since the coming in of new dispensation, we have experienced a surge of expression if interest by foreigners to invest in Zimbabwe but the take-off of actual implementation is still subdued,” the RBZ official noted.
“Lastly the economy is still experiencing external sector vulnerability emanating from a mismatch from foreign currency receipts as well as our demand for imports as that’s creating a discord in terms of foreign exchange which is a vulnerability to the economy.”
In face of all these challenges, Masendu said they had taken bold measures to reverse the price distortions.
“From most angles government and RBZ have taken some measures to reverse the price distortions particularly from the government side. The minister of finance has implemented some fiscal consolidation cognisant of the fact that fiscal deficits were fitted into high growth of money supply and decided to take down some austerity measures to cut down its expenditure whilst boosting some revenue measures,” he said.