Zimbabwe’s Ncube Sees Fiscal Order Taming Inflation, Deficit

HARARE (Capital Markets in Africa) – Zimbabwe’s government will ensure fiscal discipline to rein in an inflation rate that’s the highest in a decade and a yawning budget deficit, Finance Minister Mthuli Ncube said.

Both the rate of price growth and the budget shortfall as a percentage of gross domestic product are expected to fall below 10 percent this year, Ncube said in an interview Tuesday at the World Economic Forum in Davos. Zimbabwe’s Treasury estimated the budget gap at 11.7 percent last year, while inflation was 42.1 percent in December.

Zimbabwe is in the midst of its worst economic crisis since a hyperinflationary spiral a decade ago as it faces shortages of food, fuel and foreign currency. Disgruntlement with falling living standards spilled onto the streets of Harare, the capital, and other towns last week with thousands of people heeding a call by the country’s largest labor group to strike against the government’s decision to more than double fuel prices.

Following are Ncube’s remarks about how the government is tackling the country’s economic crisis:

Bailout Loans

• “We are looking everywhere – east, west, wherever we think we can get them.”
• “I’m hoping to approach three private-sector credit providers who are very keen to work with us especially in providing fuel, in giving us a couple of credit lines up to the tune of $500 million.”

Inflation

• “On the fiscal front we continue to make sure there is fiscal discipline, cutting back on government expenditure, making sure that it is not the fiscus that is adding to inflationary pressures.”
• “In December we are expecting inflation that is single-digit indeed.”

Budget Deficit

• “If you look at what has caused the crisis in first place, it has been budget deficits in the past and we are dealing with that, making sure that it moves from double digits to single digits by the end of this year.”
• The government is “making sure that we cut back on government waste, deal with the current account deficit.’’

Currency Reform

• “A lot needs to be done.”
• “First of all fiscal discipline, making sure we bring the budget deficit into single digits, runaway government expenditure is curtailed. Also making sure there is compliance on the revenue-collection front.”
• “Also we need to build the micro-institutions for full monetary policy conduct in the sense of introducing a monetary policy committee, making sure we put in place a framework for inflation targeting but also growth targeting.”
• “Externally making sure we can begin to address our arrears in terms of what we owe to other nations, the Bretton institutions included.”

Debt Arrears

• “The first step is to clear what we owe to the World Bank and the African Development Bank, who are the preferred creditors in a way. We are working on that.”
• “We clear those institutions first and then we move onto the second phase, which is negotiation with the Paris Club.”
• “To the world we want to show that we are making progress on the macro-economic front and walk the talk – we are doing that. It’s painful, there are protests, but we have to stay the course.”

Source: Bloomberg Business News