Country’s Challenges Will Remain Acute In The Short-To-Medium Term - Research Unit

Africa Monitor report, Fitch Solutions says Zimbabwe’s new monetary system is unlikely to yield quick results. It also projected the country’s challenges to remain acute in the short-to-medium term.

However, political pressure to continue raising wages for public sector workers — particularly the security cluster — will likely undercut government efforts to pare back spending. Reduced access to the supply of basic consumer goods and rising prices have led to widespread protests in recent months, which the military and police have been instrumental in helping to contain.

As such, we believe President (Emmerson) Mnangagwa sees it as essential in order to maintain the support of the national security forces, even at the expense of higher spending. While we deem it somewhat unlikely that the government will comply with the soldiers’ demands to be paid in US dollars following the introduction of a transitional currency (the RTGS dollar), we do see the risk of further pay rises for public sector workers in the quarters ahead, in order to prevent strikes and unrest.

This slow pace has been projected to result in serious debt management implications and subsequent failure to have access to lines of credit. That would be tricky considering that Zimbabwe’s external stock stood at US$8,2 billion as at the end of March 2019.

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