Economy to strengthen further: World Bank

14 Jan, 2022 - 00:01 0 Views
Economy to strengthen further: World Bank Professor Mthuli Ncube

eBusiness Weekly

Nelson Gahadza

Senior Business Writer

The World Bank has said Zimbabwe’s economic growth could strengthen further in 2022 if the Government accelerates implementation of policies outlined in the National Development Strategy 1 (NDS1).

This comes as the Bank said the country’s economy grew 5,1 percent in 2021, higher than the initially projected 3,9 percent, mainly boosted by higher agricultural production, improved capacity utilisation in industry, and stabilisation of prices and exchange rates.

NDS1 is a five-year development strategy aimed at realising the country’s Vision 2030, while simultaneously addressing the global aspirations of the Sustainable Development Goals (SDGs) and Africa Agenda 2063.

The macroeconomic objectives for the five-year period (2021-2025) of the NDS1 are to achieve an average annual real GDP growth rate of above 5 percent, maintain fiscal deficits averaging not more than three percent of GDP in line with SADC targets, achieve and maintain single-digit inflation, increase international reserves to at least six months import cover by 2025 and establish a market-determined and competitive foreign exchange rate regime.

The World Bank in a statement said the sustained economic growth this year will be achieved on the back of the negative impacts of Covid-19 which continue to subside.

“Growth is expected to strengthen further in 2022 as the negative impacts of Covid-19 subside, rain levels remain good, and implementation of policies outlined in the National Development Strategy accelerates.

“Good vaccination progress is likely to boost tourism, trade, transport, and other sectors that were negatively affected by pandemic disruptions,” the Bank said.

According to Finance and Economic Development Minister Mthuli Ncube, NDS1, is a successor programme to the Transitional Stabilisation Programme (TSP) to which he said notable achievements were made, in particular the restoration of external and internal macro-economic stability.

He said NDS1, implies the second phase of the road to Vision 2030, whose goal is to achieve accelerated inclusive, socio-economic growth through social transformation.

The World Bank also noted that Zimbabwe’s annual inflation will remain at two-digit levels in 2022 and 2023 if the Government continues the implementation of disinflation policies and fine-tuning of the foreign exchange auction market.

“Annual inflation stood at 50 percent in August 2021 down from a high of 838 percent in July 2020 following the introduction of rule-based reserve money management, a foreign exchange auction, and relaxation of de-dollarisation.

“However, the widening gap between parallel market and official exchange rates is likely to weigh on price stability, with annual inflation expected to average 94 percent in 2021,” the Bank said.

Zimbabwe, according to the World Bank, received the equivalent of US$961 from IMF SDR allocation, with an immediate impact of boosting gross international reserves which were critically low.

According to the IMF, the SDRs are meant to address the long-term global need for reserves, build confidence, foster resilience and stability, and to enable countries to cope with the impact of the Covid-19 crisis.

In Zimbabwe’s context, Minister Ncube said the funds would be used prudently, with accountability and transparency to support projects in the social sectors namely health, education, and the vulnerable groups, productive sector value chains; infrastructure investment and foreign currency reserves and contingency funds.

A total of US$311 million SDR funds was disbursed in 2021 with the biggest beneficiary of $144 million allocated to the Road Development Programme for the Harare-Beitbridge road, Masvingo road Interchange Development Project (Mbudzi) and Emergency Road Rehabilitation Programme.

Support for agricultural productive social protection schemes for rural and peri-urban households got US$80 million while procurement of Covid-19 vaccines got US$71 million.

Other disbursements of US$10 million and US$6 million were made to procurement of Covid-19 related medical and testing equipment and vaccine roll-out programmes respectively.

SDRs are not a currency, but an international reserve asset created by the IMF to supplement official reserves of member countries.

Minister Ncube said in 2022, the Government expects SDR disbursements of US$145 million that will go to sectors that are critical to economic development.

The World Bank said the economic challenges and extraordinary shocks caused by the drought, cyclone, and the pandemic provide opportunities to press forward with measures to protect lives and livelihoods and support Zimbabwe’s longer-term recovery.

The Bank said the NDS1 sets out an ambitious plan to support the recovery and Zimbabwe’s domestic policies need to continue supporting price stability and the optimal use of public resources, especially given large financing needs to prevent deterioration in human capital.

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