Be patient, urges Zim finance minister as inflation continues to climb

Foreign currency shortage key to rising prices, warns Old Mutual

15 May 2019 - 20:19
By James Thompson
Zimbabwean finance minister Mthuli Ncube has asked for more time to fix his country's struggling economy.
Image: AFP Zimbabwean finance minister Mthuli Ncube has asked for more time to fix his country's struggling economy.

Arresting inflation has proven to be an impossible task for Zimbabwe’s finance minister, professor Mthuli Ncube. He says he needs another year to yield positive results.

Ncube, the former chief economist and vice-president of the African Development Bank and a professor at the University of Oxford in the UK, took up the finance hot seat in President Emmerson Mnangagwa’s cabinet in August last year.

He vowed to turn the country’s fortunes around within half a year. “If you give me six months, you will see changes, significant changes,” he said at the time.

With those six months elapsed, however, there is no sign of inflation slowing down.

Figures released by the Zimbabwe National Statistics Agency (Zimstat) reveal that the annual rate of inflation for the month of April 2019 jumped to 75.86% from the March 2019 rate of 66.80% as the country’s local currency, the RTGS dollar (or ZWL), continues to weaken.

In its latest review of the economy, Old Mutual said the government’s failure to provide businesses with foreign currency has been a key driver of inflation.

“As a result of limited activity, businesses and individuals are increasingly accessing foreign currency on the parallel market, thereby widening the gap between the official and unofficial exchange rates and increasing inflation pressures as retailers pass on the additional cost of imports to final consumers,” said the company.

Speaking during his state of the economy address in parliament on Wednesday, Ncube called for calm and more time to improve the country’s economic situation.

“I urge citizens to be patient. Economic reforms don’t work instantly," he said.

"We are going through an adjustment, it will come to pass. By this time next year, inflation will be down. What we have done so far is to be true to the reform agenda."

The minister said the government was working around the clock to address a range of problems hindering economic growth. He emphasised that Zimbabwe's economic revival hinged on productivity, but the foreign currency shortage presented the biggest hurdle to this - for example by crippling the mining sector and contributing to fuel shortages.

The situation has been made worse by erratic rainfall, which has affected energy production at the country’s hydro-electricity station.