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Election-linked spending terribly strains economy



THE Chamber of Mines of Zimbabwe has warned that the macro-economic environment will remain unstable as pressure piles on the authorities to print more money ahead of the 23 August general elections.


Already, election-related spending by the government is shooting through the roof as President Emmerson Mnangagwa goes for broke, spending public funds to retain his position after the polls.

Just this week, Cabinet resolved to increase the public sector wage bill to cushion workers from rising inflation.

 “The economy remains fragile on the back of inflation pressures, exchange rate volatility, capital constrains and infrastructure deficits,” the Chamber said it its first-quarter review for 2023.

“Macro-economic instability may persist, given that traditionally election years are ac[1]companied by populist interventions that typically result in monetary growth, exchange rate volatility and high inflation.”

During the period under review, business bemoaned rolling power outages for affecting output. The power supply situation during the first quarter of 2023 was depressed, with wide[1]spread power outages across all sectors of the economy.

Domestic generation averaged around 700 megawatts against peak demand exceeding 1 500MW. Frequent breakdowns at Hwange Power Station and low water levels at Kariba Hydro Power Station resulted in low domestic power generation.

Key sectors such as mining were the worst affected, with reports of outages exceeding 12 hours a day.

 In the outlook, while power supply is set to improve (on the back of the synchronisation of Hwange units 7 and 8 as well as improved water allocation at Kariba hydro power station), power supply remains fragile against the backdrop of frequent breakdowns at Hwange units 1 to 6.

“The power supply situation coupled with worsening domestic structural bottlenecks are expected to negatively impact on domestic economic growth,” reads the report.

“Government is projecting economic growth to slow down to 3.8% in 2023. Meanwhile the situation is expected to be worsened by the combined effect of high inflation and exchange rate volatility which has resulted in macro-economic instability during the period under review.”

The International Monetary Fund, in its 2023 publications, revised downwards global economic growth projection for this year to 2.5% from the original forecast of 2.9%.

The revised forecasts are on the back of emerging risks including tight global financial conditions, worsening trade and diplomatic relations between China and the United States as well as ongoing conversations around currency options to replace the US dollar in global trade.

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