Zimbabwe Projects Inflation Slowdown


A pre-budgetary statement released by the Ministry of Finance projects a slowdown in inflation to an estimated 134% at the end of 2020 from 660%. The inflation slowdown will ride on the back of the foreign exchange auction system that has been adopted by Zimbabwe’s monetary regulators. There is anticipation that this system will lead to sustained exchange rate stability. 

The Reserve Bank has also proffered a strong grip on money supply to curtail the inflation rate. Money supply growth has been one of the major reasons for the burgeoning rate of inflation. 

source: tradingeconomics.com

The finance minister also projected economic growth of 7.4% in 2021 from a 2020 slowdown of 0.4%. The minister, in addition, promised to sharpen the investment climate and attract fresh capital to the struggling nation to realize these ambitious growth figures.

Recovery from the Covid-19 pandemic, resumption of global economic activity as well as firming international mineral prices are listed as the main growth assumptions.

On the local front, the expected drivers for growth include a good agricultural season, resumption of tourism as well as recovery in domestic aggregate demand.

Monetary officials will enhance revenue collection, control of wasteful expenditures, and value of money on all expenditures to cement growth

Mining sector to drive growth

The governments said it will prioritize finalizing the amendments to the Mines and Minerals Act to improve the investment climate around the mining sector. The amendments will foster stability, consistency, competitiveness, and transparency within the sector. This move is expected to attract new capital to Zimbabwe. 

The mining sector is projected to grow by 7,7% in 2021 from a projected contraction of 4,1% in 2020 according to the strategy paper. This is based on all the country’s minerals inclusive of gold and platinum.

Zimbabwe exports of pearls, precious stones, metals, coins was US$1.4 Billion during 2019, according to the United Nations COMTRADE database on international trade.   
source: tradingeconomics.com.  

The sector is will benefit from relatively higher prices of gold and PGMs.  The government will continue to implement measures to attract investment and bring transparency in the sector.

A COVID-sparked gold rally, as investors seek a hedge of value, has formed the basis of the mining sector optimism forecast. Some analysts have predicted a continuance in the gold rally given the second wave of the coronavirus which is currently hitting several countries.

The strategy paper also said the 2021 national budget should prioritize the opening of closed and new mines. Mining will be a leading sector in sustaining high and shared growth. Growth will be anchored on the US$12 billion mining industry target by 2023. Attainment of the target will entail increased investment in the exploration, extraction, value addition, and beneficiation across all minerals.

The paper highlighted that financial leakages are affecting the gold sector. According to the strategy paper, the country’s gold deliveries to Fidelity Printers for the three months to September 2020 were 51% and 63% below the same period in 2019 and 2018 respectively due to side marketing, coupled with the effects of the COVID-19 pandemic.

The 2021 national budget will prioritize exploring innovative financing solutions to enable migration from the current system to a computerized mining cadastre system, said the paper. 

Read also: The previous hyperinflation in Zimbabwe 



Evelyn is a finance and business content writer with a passion for business news in Africa. Her expertise is in analyzing African equities and telling the truth when it comes to doing business on the continent!

Comments are closed.