IMF growth forecast instructive

24 Apr, 2022 - 00:04 0 Views
IMF growth forecast instructive

The Sunday Mail

Victoria Ruzvidzo

Last week’s revision of the global growth forecast by the International Monetary Fund (IMF) to a possible 3,6 percent from 4,4 percent is instructive.

While the Brenton woods institution is generally regarded as conservative, the scenario playing out on the global stage does point to subdued economic growth this year.

The tiff between Russia and Ukraine has long transcended borders and is being felt right on the dining table.

The supply of most goods has been disrupted, creating shortages that have meant higher prices as laws of supply and demand kick in.

Already, we have seen the prices of fertiliser, wheat, gas and many more rise significantly while newsprint and other supplies are short.

Russia and Ukraine play strategic roles in the global commodities markets. We might as well brace for tougher times ahead, unless we rise and do something about it.

Of course, it may not be within our powers as Zimbabwe to stop the war but we can subdue the effects as best as we can.

Here at home, the economy is confronted with inflationary pressures that have triggered increases in the cost of goods and services.

The gymnastics on the foreign exchange front are not helping matters either. These factors are afflicting the economy in a big and require urgent redress.

Zimbabwe has made progress in taming inflation, but pressures of the past few months are threatening the progress.

In his address at the Zanu PF Central Committee meeting in Harare on Friday, President Mnangagwa expressed concern over relentless price increases, warning that the long arm of the law would catch up with those causing the price instability. This is not the first time he has warned those stoking inflation.

“As party leaders, let us continue to be disciplined and upright in all our business dealings. I equally call upon our business people to desist from profiteering tendencies as this goes against the mantra ‘nyika inovakwa nekutongwa nevene vayo’. Let us all be responsible citizens who are averse to profiteering and the suffering of our people,” he said.

The Reserve Bank of Zimbabwe remains upbeat the economy will achieve the 5,5 percent growth forecast this year, despite current challenges.

“Despite lack of external credit and foreign direct investment (FDI) as well as the devastating effects of Covid-19, most sectors in the economy have shown great resilience reflecting the importance of the domestic financial sector,” said the bank’s deputy director of the economic research division Dr Nebson Mupunga at the Institute of Corporate Directors of Zimbabwe inaugural Corporate Governance Colloquium in Harare on Thursday.

But Zimbabwe’s industrial body, the Confederation of Zimbabwe Industries (CZI)says the economy can only move forward if aspects to do with exchange rates are addressed urgently.

In a paper released on Friday, CZI painted a gloomy picture about the economy urging urgent redress.

We appreciate some of the concerns raised, although it appeared to have gone overboard.

The industrial representative body said it recommended the stabilisation of the Zimbabwe dollar as part of a multi-currency basket as opposed to having the Zimdollar as a single currency.

“It is important that a balanced approach is taken to bring back the local currency from the brink of rejection that it faces now in the face of exchange rate instability and increasing inflation,” recommends CZI.

Other analysts also believe strengthening the domestic currency is key. Many have asked questions as to why the local currency is receiving such drubbing on the parallel market and yet fundamentals on the ground should ordinarily influence stability.

Prominent economist Eddie Cross was quoted at the weekend as saying the economy has surplus foreign currency and an import cover of six months, conditions that promote stability of the Zimdollar but this is not the case on the ground.

All this, in our view, point to the need for an urgent confluence of minds between the Government, business and other stakeholders to tame the parallel market while arresting the seemingly growing errant behaviour by some in the economy who are compounding an already precarious situation emanating from the Russia-Ukraine challenge. CZI however, said it was committed to working with Government in finding lasting solutions. However, they need to do self introspection because some of their members are the key players on the parallel market.

“In the past 12 months the Government has made significant progress towards managing inflation and bringing price stability from the peak period of July 2020 when annual inflation reached 838 percent. The Government has also made commendable progress in infrastructure investment in the last 12 months with notable funding on dam construction and road infrastructure standing out.

“However, inflationary pressures and currency instability has persisted to the detriment of economic progress,” it said in a statement.

The need for a meeting of minds to come up with lasting solutions can never be over-emphasised in this regard. Stakeholders need to play their part in ensuring any rogue elements are dealt with decisively while strategies are adopted collectively for lasting the results.

Indeed, no one can fault the Government but sincerity from its partners is critical. Of course there is more the Government can do to create a more enabling environment and it leans heavily on the very support of business, labour and other stakeholders.

Furthermore, the need for food self-sufficiency is now even more critical than before given the global supply challenges that have emerged in the last few weeks. While this thrust is gaining traction under the Second Republic, it now needs to be achieved sooner rather than later.

In his document on the state of agriculture, Permanent secretary in the Agriculture Ministry Dr John Bhasera said Government was keen on food self-sufficiency, with import substitution being one of the major  targets.

“All the sub-sector blueprints were aligned to aspirations underlying the First Five Year National Development Strategy (NDS1) and crafted to engender the envisaged agricultural transformation agenda whose six outcomes are food security, import substitution, diversified exports, value addition, employment creation, and improved incomes and standards of living of people.

“The Agriculture Recovery Plan as a key flagship blueprint was endorsed by Cabinet and launched by His Excellency, the President in line with his Vision 2030 of empowering Zimbabwe and propelling all citizens into an upper middle-income status by 2030. The immediate target was to reverse the continued structural decline in food production more importantly in all agricultural value chains including the grains and oilseeds sector for household, national food and nutrition security targeting import substitution.

The best and smartest export any economy can ever wish for is ‘not to import what the economy can competitively produce locally’, hence the import substitution thrust,” reads the document.

The $1 billion facility set to be launched by the African Development Bank for the continent should do well to help Zimbabwe expand wheat production. We are not sure yet how much this country will be allocated but every cent counts.

Zimbabwe is already on a growth path, having achieved 330 000 tonnes of wheat last season, an increase from about 212 000 tonnes in 2020.

More effort is being directed to ensure Zimbabwe is not stranded.

Agriculture has emerged as an important sector for the sustenance of livelihoods on the group.

It is Zimbabwe’s economic mainstay.

Plans by multi-lateral and bi-lateral lenders to pour more money into the sector to address the supply side should also see Zimbabwe consolidate its prowess in the sector.

Given the impending challenges, this country should not be left in the cold when allocations are being made.

The sanctions issue by the West should not be used to yet again deprive the country of funds and yet it can do much more to impact production.

Europe would be the first to attest to the fact that fruits and vegetables from this country are more palatable than many. Zimbabwe exports these to a number of countries on that continent.

Intra-Africa trade will also be critical to ensure African brothers and sisters look after each other to offset the negative effects of shortages on the global markets.

In God I Trust!

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