THE economic crisis continues to deepen with rising inflationary pressures, worsening shortages of foreign currency, electricity and fuel, amid a widening gap between the official and unofficial exchange rates.
The shortfalls in electricity generation at Kariba Dam owing to low water levels have resulted in Zimbabwe Electricity Supply Authority implementing a massive load-shedding programme of up to 10 hours per day.
The rising inflationary pressures and widening black market premium have been key drivers of macro-economic instability in the country. The latest figures unveiled by the Zimbabwe National Statistics Agency (Zimstat) show that the annual rate of inflation for the month of April 2019 increased to 75,86% from the March 2019 rate of 66,80%.
Zimstat has recently adopted a new base to calculate the consumer price index but, going by the old base, the inflation rate for April would have been 175,326%.
On a month-on-month basis, the inflation rate for April 2019 was 5,52% up from 4,38% in March 2019. American economist Professor Steve Hanke estimated Zimbabwe’s annual inflation rate at 238% as of May 10.
The inflation outlook remains gloomy as the parallel market continues to widen, ending the week at RTGS$ 7-8 to US$1. The official exchange rate is pegged at around RTGS$5 to US$1.
Owing to shortages of foreign currency on the official market, most import-dependent businesses have to rely on the parallel market to source foreign currency. This has seen most businesses pegging prices in tandem with parallel market rates.
The poor and the working class have borne a disproportionate brunt of the economic instability. While inflation has sharply risen, wages have failed to keep pace with these inflationary trends.
For example, with average minimum wages of RTGS$300, against a food poverty line (FPL) of RTGS$295 and a total consumption poverty line (TCPL) of RTGS$873 for a family of five in April 2019, it is evident such wages are below survival levels, reducing most workers to the working poor.
Economic prospects remain murky with the International Monetary Fund (IMF) revising downwards its initial growth projection of at least 4,2% for the country for this year, warning that the economy could contract by as much as 5,2% and possibly slide into recession.
In his “State of the Economy” address presented to Parliament on Wednesday 15 May 2019, Finance minister Mthuli Ncube highlighted that following the adoption of the RTGS dollar in February as the currency of reference, the Ministry of Finance again rebased the GDP value accordingly to RTGS$70,3 billion for 2019 from RTGS$40 billion in 2018. Economic output in 2019 is expected to be depressed due to the impact of the El-Niño-induced drought, the devastating destruction of Cyclone Idai, foreign currency shortages and constrained spending being imposed by fiscal reforms in line with the fiscal austerity thrust of the government.
The economic situation in the country is largely a reflection of the political situation. There is an intricate link between the politics and economics in any country. A stable and favourable political environment provides a good basis for a stable and favourable economic environment.
A stable political environment breeds confidence in the economy, which is a key ingredient for economic prosperity. The country is currently highly divided and polarised along political lines. This has sown seeds of disunity in the country. No country can prosper economically without some form of unity and social cohesion.
In Matthew 12:25, the Bible exhorts us that, “a house divided against itself cannot stand.”
A Political Actors Dialogue (Polad) has been launched. The co-conveners of national Dialogue are NPRC Chairperson Justice Nare and Zimbabwe Gender Commission Chairperson Margaret Mukahanana-Sangarwe. For the National Dialogue process to be successful, it must be inclusive of all the key protagonists. The process of national dialogue must be broadened to include all sectors of society including civil society organisations, business groups, unions, professional associations, religious leaders and minority groups.