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Zimbabwe Finance Minister Says Economy to Contract 6.5% This Year

Finance Minister Mthuli Ncube
Finance Minister Mthuli Ncube

HARARE (Reuters) - Zimbabwe’s economy is set to shrink by 6.5% this year - its first contraction in a decade - after a drought and power shortages, the finance minister said on Thursday.

Power generation could be cut at the largest hydro plant due to low water levels, minister Mthuli Ncube also said.

Ncube told lawmakers in the resort town of Victoria Falls that Zimbabwe would spend more than $300 million to import 840,000 tonnes of maize, a staple crop, after the drought left more than half the population in need of food aid.

The national treasury said on Oct. 7 that the economy was projected to shrink by up to 6% this year.

Hopes that the economy would quickly recover under President Emmerson Mnangagwa, who came to power after the late Robert Mugabe was removed after a coup in 2017, have dimmed quickly as Zimbabweans grapple with soaring inflation, rolling power cuts and shortages of foreign exchange, fuel and medicines.

Ncube said the economy was projected to recover and grow 3%next year on the expectation that there would be better rains to power agriculture as well as improved foreign exchange inflows and electricity generation.

Power cuts have hit industry and mining, the biggest export earner. Earnings from mining fell to $1.9 billion between January and September this year, compared to $2.4 billion during the same period in 2018, central bank governor John Mangudya said.

Ncube said water in the Kariba dam, which has capacity to produce 1,050 MW, was so low to an extent that “we are dangerously close to a level where we have to cut off power generation.” Kariba was producing 122 MW on Thursday.

Zimbabweans are experiencing daily hardships with prices of basic goods, fuel and electricity soaring, while the Zimbabwe dollar currency that was re-introduced in June has continued to weaken against the U.S. dollar.

The national statistical agency stopped publishing annual inflation figures in June, but with prices surging, economists examining the official monthly data put the rate in September at 380%, the highest since the hyperinflation horrors of 2008.

Critics accuse Mnangagwa of lacking commitment to political reforms and failure to tackle entrenched corruption but the 76-year-old leader has pleaded for time and patience to bring the economy back. (Reporting by MacDonald Dzirutwe; editing by John Stonestreet)