THE latest report by the International Monetary Fund (IMF) on Zimbabwe has some clear warnings about the situation unfolding in the country: rising poverty and its root cause: a weak currency.
“High double-digit inflation and wide parallel foreign exchange market premiums have persisted. Poverty has risen and about a third of the population is at risk of food insecurity,” the IMF report read.
According to World Bank estimates, Zimbabwe had a population of 14,86 million as of 2020, so, nearly five million people are in deep poverty and at the risk of food insecurity.
This is despite the economy growing by 6,3% in 2021 “reflecting a bumper maize harvest, strong pick-up in mining and buoyant construction”.
According to the Zimbabwe National Statistics Agency’s latest information, inflation rose to 72,7% in March, up from 66,1% in February. Monthly inflation in March was 6,3% from 7% in February and 5,34% in January, suggesting that the Reserve Bank of Zimbabwe had missed its target of slowing monthly inflation to below 4% in the first quarter of the year.
Zimbabwe is facing the double-edged sword of rising and double-digit inflation and a weakening currency. Its people, especially the long-suffering poor are facing more gloom following another wave of price hikes after the local currency sharply fell against the United States dollar on the parallel market last week.
As of yesterday, the local currency was trading at US$1 to $300 on the parallel market, down from between $250 and $280, compared to the central bank’s managed exchange of $140 to the US dollar.
Prices of nearly all basic commodities including milk, bread, sugar, beef, cooking oil and maize meal among others have risen sharply, leaving the majority of workers earning in local currency struggling to make ends meet.
Is it not time for the government to consider its stance on keeping the Zimbabwean dollar as a currency? Clearly the market has lost all confidence in the unit and at this rate, the country will be in hyperinflation territory by year end.
Then there are also other necessary steps as put forward by the IMF that while there are “positive signs of economic recovery following two years of deep recession,” international reengagement has lagged as stakeholders seek political and economic reforms.
Zimbabwe clearly has potential and authorities have done well in some respects, but it is clear that the economy requires deep reforms, starting with realistically managing the currency.