HomeAnalysisWorsening economic reality debunks govt’s rosy picture

Worsening economic reality debunks govt’s rosy picture

THE upbeat tone by the government on the country’s economic recovery is a far cry from the reality of power outages, a sharp increase of prices of basic commodities and worsening poverty levels stalking citizens.

Fiscal and monetary authorities have painted a rosy picture of economic recovery pointing to various indicators, which include the fall of year-on-year inflation to just two digits for the first time since 2019, the setting up of the foreign currency auction market in June last year, which has helped companies to access cheap forex and the ability to retain a surplus from the budget.

Finance minister Mthuli Ncube even projected 7,8% growth for this year in his mid-term fiscal budget in July this year.

However, the optimism expressed by President Emmerson Mnangagwa’s government is not reflected by the grim circumstances the majority of the population encounter on a daily basis.

The United States Agency for International Development (USAid) food security arm Famine Early Warning Systems Network (Fewsnet) revealed in a recent report that household food stocks are beginning to run low as the surging cost of living continues to ravage personal incomes.

Despite a significant drop in the annual inflation rate down to 50% in August, the cost of living continues to go up and is significantly above poor households’ income in urban and rural areas.

“With the progression of the 2021-22 consumption season, households’ own-produced food stocks are beginning to run low. Some poor households have already exhausted their stocks, especially in the south where production was negatively affected by above-average rainfall during the 2020/21 agricultural season,” Fewsnet said in its latest food security report.

“Macro-economic challenges and constrained purchasing power continue to negatively affect livelihoods and food access, especially among poor urban and rural households. Although official annual inflation continues to decline, the cost of living remains high and continues to increase beyond what poor households can afford.”

Consumer bodies report that the cost of living is now more than ZW$40 000 (US$465) per month, while most people are earning between ZW$18 000 (US$209) and ZW$26 000 (US$302).

The reason behind the high cost of living is the growing disparity between the official and parallel forex rates with the former standing at US$1:$86 and the latter US$1:$160.

This has resulted in the exponential rise of prices of basic goods and services as most businesses index their prices against the parallel market exchange rate.

The majority of workers who are earning salaries are struggling to make ends meet as evidenced by some civil servants failing to attend work pleading incapacitation.

In remarks that reveal the desperate state of affairs, Labour minister Paul Mavima recently conceded that civil servants cannot afford to buy locally made products which could justify the provision of free shopping trips to South Africa.

Despite the positive noises by the government on economic recovery, the announcement by power utility Zimbabwe Electricity Supply Authority (Zesa) of a load-shedding schedule, which business has warned could massively slow down its operations already hard hit by the impact of the Covid-19 induced lockdowns.

Some business organisations have warned that this could result in capacity utilisation plunging to below 40% this year instead of the 61%, which had been projected prior to the announcement of the debilitating power outages.

Positive indicators of economic growth do not mask the numerous challenges the government faces in improving the livelihood of the country’s citizens according to economist Prosper Chitambara.

“While the economy is on a general recovery path due to a number of positive exogenous factors like the good agricultural season, there are still a number of structural challenges which include the availability of electricity, the improvement of the general infrastructure and availability of water,” Chitambara said.

“There has been a lack of substantive investment in sectors of the economy that has a direct bearing on the well-being of citizens.”

He said the government must work with the private sector to invest in vital sectors of the economy that affect the well-being of citizens and that have an impact on the country’s competitiveness.

Chitambara said the projected growth is neither inclusive nor is it pro-poor hence the need to ensure that any growth improves the livelihood of citizens.

Challenges such as that of power outages shows the serious disconnect between the government’s positive uptake on economic recovery and the present reality according to business consultant Simon Kayereka.

“The Finance minister (Ncube) must be applauded for pushing a development agenda. Theoretically, we can achieve growth but one has to consider what is on the ground,” he said.

“Right now we are being advised of load shedding which will have a very negative impact on the economy. Electricity has been the driving force for the last 200 years and one wonders why we have not got it right more than 40 years after independence.”

The optimism by the government of the country’s economic recovery also comes at a time companies are struggling due to delays by the Reserve Bank of Zimbabwe in allocating money on the foreign currency auction market which has led to major bottlenecks for companies which access the facility.

According to the Confederation of Zimbabwe Industries (CZI), companies are waiting for as long as nine weeks to receive funding from the auction system. The central bank has resolved to clear the backlog within months’ time but whether it can accomplish this, remains to be seen.

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