World Bank warns Zim
Zimbabwe should address its severe macro-economic problem, including price and exchange rate volatility and public debt arrears, among many other problems, to support future economic growth, the World Bank (WB) warned yesterday.
According to the Bretton Woods Institution, Zimbabwe’s economy will expand by 3.5% in 2024 as opposed to 4.5% in 2023 as a result of lower commodity prices and less productive agriculture after an El Nino-induced drought.
These elements could lead to financial strain.
WB Country Manager Eneida Fernandes told the delegates at the fourth Zimbabwe Economic Update (ZEU) launched in Harare yesterday that Zimbabwe needs continued reforms to boost economic growth.
“To sustain the economic growth, Zimbabwe must continue tackling its macro-economic challenges. Addressing price and exchange rate volatility and public debt arrears will support economic growth and job creation. This will help the country address the poverty, vulnerability and food insecure rates, which remain high,” Fernandes said.
Zimbabwe’s total Public and Publicly Guaranteed (PPG) debt amounted to US$17.7bn, as at end of September 2023, of which external debt amounted to US$12.7bn and domestic debt of US$5bn.
She said Zimbabwe needs to clear its debt arrears to access fresh credit lines and accelerate growth to achieve its upper middle income economy.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube concurred.
“We are happy that the World Bank recognises the government’s efforts to restore macroeconomic stability since June 2023. Let me reiterate that as a government we are committed to introduce new measures to guarantee exchange rate and inflation stability. Stability is also core to the fiscal thrust of the 2024 National Budget that is now before Parliament,” Professor Ncube said.
Economist Joseph Mverecha said Treasury should come up with more measures to complement the existing ones instituted in May and June to achieve inflation and exchange rate stability.
“From a policy point of view, there is a need to interrogate the monetary function in our country given the structured context of unique Zimbabwean situation of the multi-currency system as we are again witnessing the drift in the parallel market since end of July where we saw the official market depreciating 31% as of Tuesday this week and at the same period we have seen an even bigger drift in the parallel market of around 75%.
“This means we are where we were in April and what that means is there are some implications for price stability and this is a key issue in achieving economic growth.
“The issue of exchange rate and price stability needs a lot of attention as to what we need to do to achieve the desired growth,”Mverecha said.