eBusiness Weekly
Business Writer
Diversified international financial services firm, Old Mutual, says it anticipates a fragile political and business operating environment as Zimbabwe gets closer to the harmonised elections next month.
Zimbabwe will hold the general elections on August 23.
In its economic monthly brief for the month of June, Old Mutual said the number of court challenges associated with the nomination process has heightened political tensions ahead of the polls.
“However, a few cases of political violence have been reported thus far. There is a need for a collaborative effort between the political parties and Government to build trust and promote a peaceful and credible electoral process.
“Generally, we anticipate a fragile political and business operating environment as we draw closer to election day,” it said.
On the preparations for the forthcoming plebiscite where the Zimbabwe Electoral Commission (ZEC) has announced that 11 candidates will participate for the country’s presidency, Old Mutual said:
“ZEC revealed that only 11 candidates will participate in the 23rd of August 2023 presidential elections.
This is down from the 23 candidates who contested in the 2018 elections, partly due to the high presidential candidate fees pegged at US$20 000, up from US$1 000. However, the presence of multiple contenders vying for the highest office reflects the diverse political landscape.”
Parliamentary elections will also be held on the 23rd of August.
“Zimbabwe’s economic outlook remains uncertain due to pending elections, rising inflation and currency depreciation.
“While the recently secured African Export-Import Bank (AfreximBank) facility offers a lifeline, sustained economic recovery will require a combination of political stability, comprehensive reforms and measures to attract foreign investment,” said the financial institution.
Zimbabwe has secured a US$400 million facility from AfreximBank to boost its economy and facilitate essential developmental projects. The above financial package, Old Mutual said, is expected to play a crucial role in supporting Zimbabwe’s efforts to address the prevailing economic challenges and promote sustainable growth.
“The AfreximBank facility offers a lifeline aimed at addressing pressing issues such as infrastructure development, trade finance and foreign currency shortages.
“Overall, the AfreximBank facility is a positive development for the country. However, the US$400 million alone is seemingly insufficient to sustain the stability of the local currency and support long-term growth prospects. The authorities need to continue implementing measures to build foreign reserves, improve market confidence and reduce external debt levels for sustained stability and growth,” it said.
On the upward review of the bank policy rate to 150 percent from 140 percent and the medium-term bank accommodation rate to 75 percent from 70 percent by the Reserve Bank of Zimbabwe (RBZ), Old Mutual said rising inflation pressure and currency weakness were the major drivers of the policy decision.
This, it said, was anticipated as a high interest rate environment will likely dampen inflation and support the authority’s price stability goals.
“Moreover, the local currency depreciated 55 percent on the official exchange during the period under review,” said the financial institution.”
During the month under review, average consumer prices increased by 75,46 percent compared to 15,74 percent in the prior month. Old Mutual noted that since the beginning of the year and from June last year, prices have increased by 105,13 percent and 175,75 percent respectively.
“The June price increase marks the highest recorded month-on-month inflation rate since the introduction of the blended/weighted inflation in July 2019.
“The direction of inflation also exhibits a continued deviation from the downward trend observed since the beginning of 2023,” it said.
The Total Consumption Poverty Line (TCPL) per person per month closed June 2023 at $91,172. The TCPL was up 128,34 percent and 211,03 percent on a monthly and on a year-to-date basis, respectively.
“This partly explains the increasing demand for higher wages. Risks of price escalations emanating from wage and exchange rate pass-through effects sustain high inflation expectations in the near term,” said Old Mutual.
