HARARE, (Reuters) – Zimbabwe’s factory capacity utilisation climbed to a 10-year peak of 56.25% for 2021, according to the main industrial body. But, it warned that resurgent inflation and foreign currency shortages may threaten a sustained recovery.

Due to economic mismanagement the manufacturing sector’s percentage of Zimbabwe’s Gross Domestic Product (GDP), has fallen from an all-time high of about 25% in the 1990s, to less than half of what it is now.

The Confederation of Zimbabwe Industries (CZI), after surveying 440 manufacturing companies, found that the capacity utilisation ratio – the actual output versus the potential production capacity – increased from 47% to 56.25% the year before. This is the highest point since 2012.

CZI reported that 38% of the surveyed manufacturing firms had spent $147 million in order to increase production by 2021.

However, the industry group warned of high inflation and currency crises that could pose a grave threat to Zimbabwe’s economic health.

Zimbabwe’s inflation is rising again following a sharp slowdown in 2021. The country’s currency is continuing to decline rapidly in relation to the U.S. dollar, resulting in an increase of 96.4% year-on-year inflation. This was a significant improvement from 60.6% the previous April.

Banks were ordered by President Emmerson Mnangagwa to immediately stop lending. This was part of an array of measures that the authorities believe is intended to end speculation about the Zimbabwean dollar.

Cornelius Dube (CZI chief economist) stated, “The currency crisis and the associated inflationary tension can derail this momentum into 2022,” while presenting the results.