BY TAURAI MANGUDHLA
INDUSTRIALISTS and economic experts were yesterday sharply divided over the 2021 economic prospects at a meeting organised by CEO Africa Roundtable (CEOART) to review the first quarter of the year.
While some experts painted a gloomy picture, others said the economy was on a recovery path.
CEOART chairperson Oswell Binha said growth targets set by the government in December 2020 were difficult to achieve due to the Covid-19 pandemic, which has forced government to divert a huge amount of resources to contain the spread of the virus. This could lead to budget overruns.
Industrialists said the Covid-19 pressure may force the Reserve Bank of Zimbabwe (RBZ) to print more cash to fund government operations, thereby fuelling hyperinflation.
“The Covid-19 pandemic will likely put pressure on the 2021 fiscal position. In my view, the absence of external financing is a setback; we are likely to see overshooting of expenditure, making fiscal consolidation a murky exercise,” Binha said.
He warned that economic volatilities could affect revenue performance, as companies struggle under the harsh economic environment. About 90% of state revenues came from taxes in 2020.
“How will this ZW$421 billion
(US5,01 billion) budget be funded? This presents great risk of a potentially huge budget deficit, which could be very inflationary if funded through money creation,” Binha said.
In 2020, Zimbabwe’s economy was affected by blanket lockdowns announced by the government to prevent the spread of Covid-19.
Binha said given these scenarios, the 7,4% economic growth projections made by the Ministry of Finance and Economic Development was too optimistic.
“The Ministry of Finance and Economic Development paints a picture of an economic boom. However, economic stability is built on the sobriety of policies and reality looking at elimination of populist stances,” he said.
Binha said the government was expected to support production and craft measures to restore confidence.
“We expect to see a movement to ensure the country goes back to a savings culture and money back into the formal banking system,” Binha said.
But Zimbabwe Economic Society vice-president Misheck Ugaro said the economy was on a recovery path.
“I am of the view that our country just needs to deal with confidence because I believe many of the fundamentals have been corrected,” he said.
Ugaro, a banker, argued the 7,4% growth target was achievable, as several interventions stabilised the foreign exchange rate.
“We have price and exchange rate stability, but we don’t have growth. We still have structural poverty and high unemployment, so on the one hand, we have stability, but on the other, we have a contracting economy, and increasing poverty. In terms of economics, that is a suboptimal stability. In other words, it is not sustainable,” Ugaro said.
“The stability that has been achieved is therefore not at equilibrium with the economy. If you look at the economic policies; they are disinflationary in the sense that they are targeted at reducing inflation and that has been achieved.”