The Sunday News
Judith Phiri, Business Reporter
THE domestic economic growth for the year 2022 has been revised downwards from the 5.5 percent initially projected to 4.6 percent, reflecting the impact of the external global environment as well as the country’s own unique circumstances.
Presenting the 2022 Mid-Term Budget and Economic Review and Supplementary Budget to Parliament on Thursday, the Minister of Finance and Economic Development Professor Ncube said the domestic economy has not been insulated from the global developments, particularly from rising commodity prices and inflation as well as disruption on supply chains. He said: “As a result, domestic economic growth for the year 2022 has been revised downwards from the 5.5 percent initially projected to 4.6 percent, reflecting the impact of the external global environment as well as our own unique circumstances.”
“Growth has also been weighed down by reduced output from the 2021/22 Agriculture season, while other productive sectors are still projected to register positive growth. Prof Ncube said notwithstanding the global and domestic shocks, the country continues to record positive economic growth, increase in foreign currency receipts, near balanced budget as well as increasing capacity utilisation of the manufacturing sector.
He said the depreciation of the local currency and rising inflation, however, remained a challenge that Government has committed to tackle going forward. In terms of inflation developments, the Minister said: “Mr Speaker Sir, inflationary pressures experienced during the first half of 2022 saw headline inflation steadily accelerating from 60.7 percent in January to 191.6 percent in June 2022. This has been driven partly by external factors which impacted negatively on import prices of raw materials, food and liquid fuels.”
Prof Ncube said imported inflation contributed significantly to domestic inflation through cost push factors, whilst domestically, adverse inflationary pressures and exchange rate volatility were the main drivers of inflation. In response, he said Government has since introduced a raft of measures, meant to instil confidence, strengthen demand for local currency and foster market discipline to contain inflation.
Monetary Developments, the Minister said: “Mr Speaker Sir, the Central Bank has maintained a tight monetary stance to control inflationary and exchange rate pressures. Reserve money stock has increased to ZWL$33.6 billion as at 30th June 2022, largely due to growth in statutory reserves in line with the thrust of tightening monetary policy.”
Prof Ncube said as at end-June 2022, more than 80 percent of the stock of reserve money was in the form of statutory reserves, while currency issued by the Bank and banks’ liquidity at the RBZ (RTGS balances) constituted the balance. However, he said broad money registered a growth of 245 percent in May 2022, largely driven by exchange rate depreciation, accounting for over 50 percent of the increase.
The Minister said the annual growth in broad money was largely driven by increases of 316.9 percent and 286 percent in credit to the private sector and net claims on Government, respectively. “Credit to Government, however, is merely an accounting treatment of the drawdowns on the Special Drawing Rights (SDR) reserves by Government, and does not represent actual lending to the Government.”
Prof Ncube said Government has introduced an instrument that enables investors to store value in both local and foreign currency, through the gold coins minted by Fidelity Gold Refineries. He said the gold coins were tradable, highly liquid and can be used as collateral security. “Members of the public have been given an option to physically own them or to keep them in safe custody with their bankers. The price of the gold coins will be determined by the prevailing international price of gold,” he said.
