Zimbabwe is in no rush to lower its economic growth and inflation expectations for 2021, Finance Minister Mthuli Ncube says, despite the grave risk brought by turmoil on the world markets.
Government has projected economic growth of 5.5% this year and inflation of up to 35% by year end. These targets were already in doubt at the time they were made, and now look even less likely as the cost of oil and other key imports soar due to the Russia-Ukraine war. But Ncube insists he is not making any downgrades, yet.
“We’re not rushing to revise our inflation or growth figures,” Ncube told reporters on Tuesday from Dubai. “I think the May (oil) futures contracts are US$112 per barrel. So we’ll watch those numbers. We are not rushing to revise inflation or growth figures.”
The World Bank sees much lower growth of below 4.3%. A recent Old Mutual report forecasts inflation at above 105% by year-end.
Transportation is the biggest driver of inflation, and higher fuel prices, which recently rose sharply twice in a week, are expected to put more pressure on inflation, already being carried by Zimbabwe dollar weakness. Ncube believes a small cut on fuel levies will lighten the impact.
He said: “We’ll continue to watch and act appropriately in terms of our subsidy program which we are running by controlling or changing the fuel levies that we levy on the fuel price. We’ll make the appropriate announcement when we make any changes of outlook or on growth, inflation, or other variables.”
Part of the moves on fuel includes a cut on fuel levies.
“We’ve run our calculations and strategies. We have actually been running this subsidy for five months. The way we’ve done it is reducing the fuel levy from 12.7 (US) per litre to 8.7 cents. So we’ve been playing around to make sure that we lower the surge in the fuel price,” Ncube said.
However, that tax cut has not been enough to cushion the economy from fuel costs, which are the highest in the region. At the weekend, President Emmerson Mnangagwa said he had instructed further fuel tax cuts. No detail has been given on this plan.