A BLAZING currency crisis that has rocked Zimbabwe since 2019 could be the biggest hurdle against Harare’s hyped plan to achieve middle-income status by 2030, according to Fitch Solutions, the global rating agency.
President Emmerson Mnangagwa’s administration says its interventions since taking power about four years ago have laid a foundation to help Zimbabwe rebound into a US$5 000 per capita gross national income by 2030, and thrust it in the same league as Algeria, Botswana, Gabon, Mauritius, South Africa, Tunisia, Angola and Namibia.
China and Brazil are also in this league.
In an interview with businessdigest last week, Fitch Solutions head of Sub–Saharan Africa country risk, Jane Morley said unless trouble on the currency front is addressed, the vision would remain a pipedream.
Morley spoke as the Zimbabwe dollar continued losing traction against the US dollar, depreciating to about US$1:$230 this month, from US$1:$120 in January last year.
The local currency has also been decimated on the foreign currency auction system, where it traded at US$1:$115,42 this week from US$1: $6,32 when the platform was introduced in June 2020.
However, Morley projected growth in some sectors this year.
“Agriculture and mining were the main drivers in growth last year and we are forecasting mainly mixed growth,” said Morley, who spoke to businessdigest during a Sub-Saharan Africa macroeconomic update last week.
“The predominantly rain-fed agriculture sector is already showing signs of strength and we still expect the mining sector to perform well.
There appears to be at least a partial recovery in the tourism sector for the year. However, clearly, the currency regime is going to continue to act as a substantial constraint on growth and will likely cap positive expansion.
Frankly, I don’t think Zimbabwe’s aim of becoming a middle-income country is feasible until at the least the foreign currency regime is sorted out,” Morley added.
Fitch says Zimbabwe’s economy grew by 4,9% last year due to an improved agricultural season and firmer international commodity prices that boosted mining exports.
Authorities placed the growth rate at 7,8%.
The US-based agency predicted the rebound to continue this year, resulting in growth of 3,8%.
“Part of the problem is that there is such a lack of predictability, and shifts,” Morley said.
“There is also going to be a lot of risks going into 2023 given the likely instability in the run up to elections.
There are downside risks to our growth forecasts there,” she noted.
Leading economist, Tony Hawkins said: “There should be more focus on public sector investment, spending, rather than worrying so much whether there is a budget surplus or not.
I think above all, one has to face up to the fact that more people are living in poverty, more people are unemployed, more people with skills and training are leaving the country.
People should not have to leave to earn a living wage and we all know, according to the latest survey that 80% of people in the formal sector are earning less than the poverty datum line for a family of five”.