Leading economists have raised concerns over the potential economic impact of the recent waves of price hikes and currency volatility, which threaten to further destabilize an already fragile economy. The warnings come as Zimbabwe slashed its 2024 growth targets for the third time in response to droughts and international economic pressures.
Initially, the Ministry of Finance projected the country’s gross domestic product (GDP) to grow by 5.3% in November. However, the estimate was revised down to 3.2% in July due to the devastating drought affecting agricultural output. Most recently, the Reserve Bank of Zimbabwe further downgraded GDP growth to 2% in its monetary policy statement last month, aligning its forecasts with regional institutions such as the African Development Bank.
The situation has been worsened by Zimbabwe’s newly introduced currency, Zimbabwe Gold (ZWG), which has faced considerable pressure from black market forces since its launch in April. Originally valued at US$1.56, the ZWG has since slipped to US$1.95 on formal markets and plummeted on the black market to US$1 this week.
Economist Chenayimoyo Mutambasere, from the Centre for Economic Justice, warned that these developments would severely strain household budgets, particularly for low-income families. “When prices of staple items like food, cooking oil, and toiletries rise, consumers are forced to either cut back on consumption or reallocate spending, potentially compromising on health or education needs,” Mutambasere said.
The multi-currency system in Zimbabwe, with both ZWG and US dollars in circulation, has added complexity to the economy. Mutambasere highlighted that price hikes in both currencies reflect broader inflationary pressures. She noted that poor infrastructure development has exacerbated supply chain issues, with businesses forced to rely on expensive fuel-powered generators to mitigate energy shortages.
Ennywealth
