Finance minister rejects economic crisis claims

09 Jun 2022

Zimbabwe’s finance minister has rebuffed claims the country is in the midst of an economic crisis and said, “all is well.”

Following a post-Cabinet briefing on Tuesday, Ncube said during an interview with NewsDay: "What crisis? We are performing well. We have put measures in place to fight inflation, people should not panic, everything is in order, all is well.”

However, some analysts rejected the minister’s statement, claiming it to be inconsistent with the current situation of incessant price rises and the local currency being in freefall.

A number of businesses are rejecting the local currency, preferring the U.S. Dollar to hedge against a repeat of the 2008 crisis, which saw a hyperinflation rate of 500bn% in Zimbabwe.

Zimbabwe’s year-on-year inflation is currently one of the highest in the world, soaring to 131% in May, a rise from 96% in April. 

The inflation has led to the government being urged to re-dollarise the economy, yet the finance minister said there would be no reverting back to dollarisation: "We have embraced the U.S. Dollar, but have also embraced our own currency, the Zimdollar, so there is no rejection of the U.S. Dollar. So, this is what will happen on day one if you adopt the U.S. Dollar as your currency, something very nasty will happen," Ncube said.

"You will wipe out the entire banking sector because you will have to convert the Zimdollar balances into U.S. Dollars. The banks will have a negative balance, you will have a crisis; a cash crisis because you cannot print U.S. Dollars.”

He added: "The advantages of having a domestic currency circulating alongside (the U.S. Dollar) is that we have been able to manage the cash shortage situation which we have been through before. The economy, especially the manufacturing sector, will immediately lose its competitiveness against foreign products. We will then have to do away with monetary policy, you cannot have a country that has no monetary policy, but only has a fiscal policy."