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Battered Mthuli faces uphill task

Losing legislator, Mthuli Ncube, the minister of finance and investment promotion, has a monumental task ahead of him to extricate  the economy from its problems, which are characterised by a variety of economic and social headwinds.
The government is battling a number of challenges, including currency and exchange rate volatility, unsustainable recurrent expenditure, a declining tax base, a resurgent crippling power crisis that is beginning to cripple industry, and an unsustainable debt burden that is harming the economy.
Due to increased informalisation of the economy, the tax collector ZIMRA is tasked with formulating and implementing  feasible strategies to tax the informal sector.
Zimbabwe’s struggling businesses are fighting to stay afloat as the country’s economy continues to deteriorate. Numerous businesses are closing, adding to the growing corporate graveyard.
After firming against the United States dollar just before elections held last month, the Zimbabwe dollar is losing value again against all major currencies.
This week, the Zimbabwe dollar was trading at ZWL$4 712.16: US$1 from ZWL$4 604.62:US$1  three weeks ago.
On the parallel market , the Zimbabwe was yesterday trading at ZWL$7 500 : US$1 from US$6 000:US$1 three weeks ago.
The main opposition party Citizens Coalition for Change (CCC) vigorously contested the results of the recently held harmonised elections, refusing to accept the results and calling for a new election on the grounds that the election was not free and fair. This made the situation worse.
Due to this, cash-strapped Harare is now vulnerable and could  drag down inflows of foreign direct investment.
Ncube recently presented his Mid-Term Policy Review Statement.
But, multiple analysts say  the fiscal review could be another damp squib because there is no fiscal space to accommodate the new mid-term budget targets.
FBC  chairman Herbert Nkala said despite the economy is vulnerable to economic headwinds.
“There are, however, downside risks which remain in the operating environment. These include exogenous factors, largely emanating from slow global macroeconomic growth, monetary policy tightening by a number of governments to contain inflation and un-ending geo-political conflicts. These may impact the country’s foreign trade and foreign currency receipts. The group in response has been adapting its strategies and seizing opportunities with particular emphasis on hedging, investments and increasing our products and services range across key sectors of the economy,” Nkala said.
Another executive, AfDIS company secretary Lydiah Mutamuko said. “The economic environment still presents opportunities for business growth despite uncertainties around exchange rates and utilities availability. Management continues to put measures in place to exploit the available opportunities to sustain market share,revenue, and profitability growth. Focus will also be on product innovation, production efficiencies and cost containment measures, “ AfDIS company secretary Lydiah Mutamuko said.
BridgeFort  CEO Vernon Lapham  said the economy faces serious uncertainties.
Economist Gift Mugano,  said  the country will nosedive into crisis as the same personnel who did not heed experts advice continue to lead the economy.
“Treasury will certainly grapple with economic  downturns as they continue to fund infrastructure projects  and  agriculture  with short term financing. This will certainly create pressure for the government to turn on the printing press as  those who would have done the job would want payments. The exchange rate volatility is expected to get out of hand  soon as the government  is yet to pay farmers and contractors both in RTGS  and US$. As soon as they pay, things will go haywire,” Mugano said.
He said there are fears that while the central bank continues to dictate the exchange rate, there is no hope for convertibility determined by free market conditions.
“The country remains in a volatile social and economic period which needs level political minded leaders to handle this with care but I don’t see [the authorities] having that capacity to think straight in terms of management of the affairs of Zimbabwe,” Mugano said.
Even Ncube himself fears the economy could face an explosion.
“In spite of the positive economic outlook, the economy still faces some risks, mainly arising from price and exchange rate volatility, which complicates policy choices between stability and growth. Containing Exchange rate volatility and domestic inflation pressures remains anoverriding objective of the government as it engenders market confidence,investment and competitiveness of the economy,” Ncube said.
The International Monetary Fund (IMF) predicted a further fall in the gross domestic product (GDP) this year due to among other things, “renewed domestic and external shocks (inflation surge, erratic rainfall, electricity shortages, and Russia’s war in Ukraine) … adversely affecting economic and social conditions.
“These multiple shocks will continue to weigh on Zimbabwe’s growth prospects,” the IMF recently said.
Companies executives are also worried about the uncertainties that are surrounding the economy  as this could affect their operations and working capital.
In the absence of foreign funding, Zimbabwe’s economic challenges are expected to continue as millions face an uncertain future.
Furthermore, Zimbabwe’s re-engagement campaign and debt resolution plan with Bretton Woods institutions and other international creditors could be in jeopardy following  elections held last week that have resulted in political tensions amid fears of instability.
The international creditors imposed a number of stringent conditions precedent, one of which was that Zimbabwe hold free and fair elections.
The conditions were reached during a recent conference call between Mnangagwa’s  administration and its foreign creditors.
With arrears of about US$6.68m Zimbabwe has been working to pay off its external debt which stands at US$12.8bn.
Out of this, Zimbabwe owes the World Bank about US$1.4bn, African Development Bank (US$671m), the European Investment Bank (US$372m), while the Paris Club and non -Paris Club are owed US$3.55bn and US$2.22bn respectively.
Zimbabwe’s credit rating has been impacted by the debt, making it an outcast on global capital markets. Therefore, paying off the debt is a mandatory requirement before obtaining new international funding.

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