HARARE – Zimbabwe’s government said it is ready to settle with global lenders, sell assets and make the difficult spending decisions needed for financial recovery. But with opposition protests against plunging living standards scheduled in cities nationwide, it is in a race against time.
In an exclusive interview with Bloomberg News on Thursday, Finance Minister Mthuli Ncube dismissed rapidly accelerating inflation as “wage compression” and warned the country it will have to endure four more months of economic pain. On Friday morning, police in the capital violently dispersed demonstrators protesting over the hardship his austerity measures have spawned.
“The big macro-economic decisions should be complete by year-end,” Ncube, 55, said in Harare. “In December, everything stops in terms of the big decisions. Beyond that, we focus more on jobs, growth, productivity and development.”
Almost a year into the job, Ncube, a Cambridge-university trained economics professor, has reined-in state spending and boosted tax revenue. But his introduction of a new currency in June, accompanied by a ban on the use of the US dollar, has seen the rapid erosion of spending power with the Zimbabwe dollar trading at almost 10 to the greenback. Its predecessor, a quasi-currency known as bond notes, was officially said to be at parity as recently as February.
Now many of the country’s 400 000 civil servants, who form the bulk of the middle class, are earning less than the $1.90 (R29) a day defined by the World Bank as the line below which people are living in extreme poverty.
Zimbabwe’s annual inflation, the release of which has been suspended for six months, is officially 176 percent, the highest globally after Venezuela, and shortages of fuel and bread are widespread.
The government’s inability to pay for adequate electricity imports has crippled the economy with power outages of as long as 18 hours a day. The measures, which Ncube conceded were painful for citizens, are necessary if the country is to regain a sound economic footing, he said.
There’s a growing risk that the economic hardship may trigger unrest similar to violence that took place two decades ago, said Japhet Moyo, the head of the Zimbabwe Congress of Trade Unions, the biggest labour federation.