Food, power and currency stability are the three things most likely keeping Zimbabwean Finance Minister Mthuli Ncube awake at night.
The southern African country is facing drought for the second consecutive year, with more than 8 million people food insecure.
The drought, according to the World Bank’s Global Economic Prospects report for 2020, had a devastating impact, with the organisation projecting a contraction in Zimbabwe’s GDP of at 7.5% in 2019.
“Activity has been further constrained by persistent shortages of food, fuel, electricity, and foreign exchange,” reads the Report.
18-hour load shedding
Zimbabwe is also going through a debilitating power crisis, which has seen load shedding continuing for as long as 18 hours per day.
The Zimbabwe dollar lost some 90% of its value in 2019, with the exchange rate against the US$ dropping to US$1:Z$16 by year end from US$1:Z$2.5 in February when it was floated.
Ncube said, in the first quarter, government was prioritising setting aside resources to be able to import food by June 2020 and beyond.
“We are doing everything we can to make sure power is available, food is available, but of course a key issue, which is a third issue among the three things that keep me awake at night which is food, power and the other is obviously currency stability.
Stabilising the currency
“We want to make sure we do everything to stabilise the Zimbabwe dollar,” said Ncube in an interview with state broadcaster ZBC.
He said the Zimbabwe government was pleased that the exchange rate had been more stable in the last quarter.
“We want to keep it that way.”
As at Wednesday, January 15, the Zimbabwe dollar was trading at Z$17.06 to the US dollar.
Ncube said currency stability would be achieved by ensuring government expenditure was kept under control.
“Also, we want to make sure that the monetary targets that the central bank manages also stay within the range in terms targets so that we don’t have excess money supply contributing to currency instability.”
He said if the currency were kept stable, currency volatility would have a lesser impact on pricing among retailers, which would mean less price adjustment in US dollars.
“That will go a long way in dealing with the issue of inflation.”
Before Zimbabwe outlawed the publication of annual inflation figures, inflation had reached 176% in June 2019.
Independent estimates put November 2019 annual inflation figures at 481.05%.