Temba Dube
Judith Phiri [email protected]
THE Government has been called upon to put measures in place to cushion the economy against potential shocks arising from the predicted El Niño-induced drought and continued unrest in the Middle East, which is already affecting the country through disruptions to global trade, supply chains and commodity markets.
The impact of the Middle East war has affected fuel prices locally, which have increased, while the supply of some agricultural products like fertilisers has also been negatively impacted.
Presenting a paper on the Macro-economic Spillover Effects of the Iran War on Zimbabwe’s Economy and the Role of Monetary Policy at ZEDCON 2026 on Wednesday, RBZ Deputy Director, Dr
Nicholas Masiyandima said the recent past has witnessed an escalation in geopolitical conflicts and wars with far-reaching global effects.
He made reference to the shocks on economic activity, trade, the public sector and inflation.
“The US-Israel war on Iran introduced a new wave of global uncertainties and risks. Iran is a major producer of oil and there have been significant disruptions on the Strait of Hormuz,” said Dr Masiyandima.
“About 20 million barrels of crude oil and petroleum products constituting 20 percent of global oil consumption transit through the Strait of Hormuz per day. About 30 percent of global fertilisers, including up to 50 percent of fertilisers and agricultural chemicals destined for Africa, are also shipped through the strait.”
He said Brent crude prices have gone up US$120 per barrel while the price of fertilisers also went up by 40 percent by mid-March 2026.
Dr Masiyandima said the insecurity and disruptions around the strait have the potential to generate significant macro-economic spillovers across global markets for oil, gas and agricultural products, with broader supply chain disruptions.
“A short-lived war in the Middle East would slow down global economic growth to 3.1 percent in 2026 (from 3.5 percent), with a prolonged war slowing global economic growth to 2.5 percent according to the World Economic Outlook, April 2026.
“A monetary policy dilemma exists when confronted with supply shocks from natural disasters, disease pandemics and wars. Monetary policy response to a supply shock is not obvious – tightening or loosening or maintaining,” he said.
Dr Masiyandima said common fiscal policy responses include higher public expenditures- mitigation, rescue operations, support for vulnerable populations and post-event safety nets.
On main findings, he said the baseline annual inflation would increase to 6.4 percent and 7.1 percent at the end of 2026 (fourth quarter) and 2027 (first quarter), respectively, in response to a short-lived war.
“Annual inflation would decelerate to 2.8 percent at the end of 2027 (fourth quarter) as oil prices fall back to the pre-war price. The ‘no policy’ scenario has annual inflation rising to a peak of 11.1 percent in 2027 (first quarter) before declining to 2.7 percent in 2027 (fourth quarter),” he said.
Dr Masiyandima said the results in both cases do not include potential impact from the projected El Niño adverse weather impact on agricultural production and food inflation.
On the impact of the long war on inflation, he said annual inflation profiles are elevated over all quarters across all three scenarios.
“Annual inflation under the ‘with policy scenario would reach a peak of 11.6 in 2027 (Q1) before decelerating to 5.4 percent in 2027 (Q4). Annual inflation when the central bank responds would increase to a peak of 9.8 percent in 2027 (Q1) before decelerating to 3.5 percent in the fourth quarter of 2027, marginally above the baseline inflation of 2.8 percent,” he said.
“The results in both cases don’t include potential impact from the projected El Niño adverse weather impact on agriculture production and food inflation.”
In light of the current weather forecasts that predict the occurrence of El Niño weather conditions, whose impact would compound the already existing supply shocks from the war, the paper calibrated the joint effects of the war and the ‘bad weather conditions’ on domestic inflation and economic growth on the assumption that the war will be prolonged.
“The paper projects that a prolonged war in the Middle East will have significant impacts on Zimbabwe’s inflation. In both the ‘short’ and ‘long war scenarios, monetary policy plays significant dampening effects to ameliorate the effects of the war on inflation,” he said.
“The effects of El Niño weather conditions predicted for Zimbabwe in the 2026/27 agriculture season are projected to worsen the country’s inflation and growth outcomes, although the impacts on inflation are marginal.”
Dr Masiyandima said the projected result suggests that the scope for monetary policy to dampen the effects of the war and bad weather on Zimbabwe’s inflation and economic growth is critical.
He suggested that the central bank has a role in both stabilising and reigniting the economy against the supply shocks emanating from the war or other climate-related disasters and calamities.
ZEDCON 2026 is running under the theme: “Smart Infrastructure for an Upper-Middle-Income Society.”
