Zimbabwe Struggles to Stabilize Economy After Price Hikes

Zimbabwe is working tirelessly to ensure economic stability due to internal economic imbalances and price increases emanating from the Russia-Ukraine conflict, Finance Minister Mthuli Ncube said on Thursday.

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In a ministerial statement to Parliament, Ncube said the government had adopted several measures to stabilize the currency and lower inflation in conjunction with the central bank, including fiscal consolidation and restraining reserve money growth.

He said the International Monetary Fund (IMF) had since revised Zimbabwe's growth forecast downwards from the initial 4.4 percent in 2022 to 3.6 percent because of the Ukrainian conflict, which has escalated the disruption of global supply chains.

The challenging global crisis is "in addition to our own historical challenges of sustained periods of economic imbalances, in particular, the twin deficits of the fiscal and current account," Ncube said.

Rising energy and wheat prices on the international market had caused imported inflationary pressures on the domestic economy, with high fertilizer prices also driving up agriculture production costs and, ultimately, food prices.

On a positive note for Zimbabwe, international precious mineral prices have been firming, which might increase revenues from international exports. Besides the conflict in Eastern Europe, inflationary pressures in the country were driven mainly by exchange rate depreciation and rising international prices.

"Inflation is also now being driven by expectations of higher inflation and exchange rate depreciation. Prices of goods and services are being quoted with a premium. This results in a self-fulfilling upward movement in general prices of goods and services in the economy," Ncube said, adding that he hoped the Russia-Ukraine conflict would end soon so that prices could normalize on the domestic market.

"In the meantime, we are monitoring the developments. If the situation worsens, the government would find other areas... to cushion against price increases and exchange rate depreciation," he stated.