The ability of Zimbabwean authorities to tackle a stubborn economic crisis came under the microscope on Tuesday as a new report revealed graphic details of the headwinds that continue to hinder a “much solid” economic recovery.
The bulk of handicaps confronting Zimbabwe’s economy are internal, according to a report by advisory firm Morgan&Co, which discounts official propaganda blaming external forces for fuelling the crisis.
In the report that attempts to make out the outlook following a string of hasty interventions by firefighting authorities in the past few months, Morgan&Co still tipped Zimbabwe for recovery in 2022.
But it said the pace of the rebound would hinge on how authorities handled hurdles stemming from upcoming general elections, continuing power shortages and a “colossal” debt, all of which will frustrate ongoing efforts to cool off protracted jitters.
In July, authorities acknowledged shocks that continue to roam the Zimbabwean economic landscape when Finance and Economic Development minister Mthuli Ncube cut growth targets to 4,6%, a significant reduction from 5,5% projected in December 2021, citing depressed activity as rates rioted while inflation raged.
Authorities project the annual inflation rate to plummet from October, after hitting 286% last month — one of the most aggressive of such rises in recent months.
Morgan&Co called on government to keep an eagle’s eye on the inflation rate, a scourge that is not new to Zimbabwe after forcing the abandonment of the domestic unit in 2008.
“A key concern has to do with emerging inflationary pressures in the domestic economy and a deteriorating Zimbabwe dollar,” the advisory said in its report titled Economics & Equity Strategy Note, the Zimbabwe Syndrome.”
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“This has triggered the government of Zimbabwe to institute measures that have impacted local capital markets. Further, the introduction of gold coins to the universe of investable assets has implications on traditional investment markets in Zimbabwe (such as the stock market). Overall, while we expect the country to register modest growth in 2022, extreme economic risks still exist and continue to hamper the potential for a much solid economic recovery,” the report noted, as it warned that difficulties faced by firms to access capital would be among the highlights of a tougher than expected 2023.
The capital crisis has been compounded by aggressive rate hikes announced in May, placing the cost of borrowing at 200%, from 80% previously.
It was good news for banks that had warned of gridlocks under “sub-economic” rates, but firms say their ability to fund working capital and acquisition of implements was thrown into disarray the moment the new rate was announced.
The funding issue is expected to pop up frequently during the Confederation of Zimbabwe Industries conference that kicks off in Harare today, along with other problems like foreign currency shortages.
“The negative impact of the Russia/Ukraine war, a colossal debt overhang (US$13,15 billion in external debt), limited access to credit, country specific issues such as power shortages and election-related risks all present significant headwinds for economic growth in 2022 and 2023,” Morgan&Co added.
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