Online Reporter
Persistence Gwanyanya
AS anticipated, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube opted for policy continuity over radical shifts in the Mid-Term Budget and Economic Review presented on Thursday.
This strategic consistency reinforces policy predictability, a fundamental tenet of macroeconomic efficacy and investor confidence.
The current fiscal framework has been instrumental in delivering the stability and growth currently characterising the economy.
Driven by prudent fiscal consolidation, monetary authorities have successfully maintained a tight monetary policy stance.
This conservative fiscal approach yielded a primary surplus of ZiG14,4 billion (US$546 million) in the first half of 2026, generated from total revenue of ZiG137,8 billion (US$5,3 billion) against expenditures of ZiG123,6 billion (US$4,75 billion).
Historically, macroeconomic volatility in Zimbabwe was primarily occasioned by the monetisation of fiscal deficits, which peaked at over 10 percent prior to the 2018 economic reforms.
Reflecting a disciplined fiscal regime, the Treasury has stopped borrowing from the Reserve Bank of Zimbabwe (RBZ).
By law, based on the projected previous year’s revenue of US$9,5 billion, the Treasury’s statutory borrowing limit is 20 percent (US$1,9 billion), with an internal limit of 5 percent (US$475 million).
The decision not to borrow from the central bank is a critical structural correction necessary to anchor inflation expectations and sustain market confidence.
Debt challenges
However, a primary surplus does not imply the resolution of our sovereign debt challenges.
The national debt stood at ZiG580,9 billion (US$21,7 billion) as of June 30, 2026.
While the debt-to-GDP ratio remains relatively low at approximately 42 percent, the true bottleneck is the composition of this debt.
Persistent external arrears act as an albatross, hindering access to the concessional funding required to rebuild critical infrastructure.
Consequently, the Treasury has historically relied on domestic budget financing for infrastructure — an unconventional and inflationary source that drives market volatility.
To mitigate this, there is an urgent need to pivot towards private sector lending and innovative financing models, notably public-private partnerships (PPPs), following Cabinet’s recent approval of the PPP framework.
It is encouraging that the Treasury secured US$400 million in the domestic market, with US$100 million immediately available for drawdown to finance major projects, including the remaining 33km of the Beitbridge-Harare highway and the Bulawayo-Victoria Falls Road.
Furthermore, prospects for accessing concessional funding from the BRICS New Development Bank, following the country’s admission, align with the post-global financial crisis shift in global economic architecture.
On the monetary front, disinflationary policies have successfully delivered an average annual ZiG inflation rate of 4,4 percent and constrained parallel market premiums to below 20 percent during the first half of 2026.
The reserve accumulation strategy has bolstered foreign reserves — comprising forex and gold— to US$1,6 billion.
This provides robust cover, representing six times the ZiG reserve money and 1,5 times the total ZiG money supply.
Nevertheless, entrenching this stability requires increasing the domestic demand for the ZiG to reverse structural dollarisation.
Given that the Government commands over 70 percent of market power, this transition must be gradual to honour existing USD-denominated contracts.
The Treasury’s commitment to widening ZiG use cases beyond corporate taxes is a vital step in normalising the local currency.
The economy has demonstrated renewed growth momentum, with first-quarter GDP growth reaching 6,8 percent, significantly outpacing the 4,4 percent recorded in the previous year.
This reinforces confidence in achieving the year-end target of 5 percent.
This expansion is predominantly driven by the mining and agricultural sectors, underscoring the imperative to climb the global value chain.
Progress in value addition and beneficiation is evident.
The manufacturing sector is recovering at an encouraging pace, recording 5,6 percent growth in 2025, supported by ease-of-doing-business reforms.
The rationalisation of regulatory and compliance fees across all 12 economic sectors, coupled with ongoing monitoring to ensure compliance, has significantly reduced the cost of doing business.
Looking ahead, growth traction is expected to persist, with tax revenue collections projected to exceed the US$9,2 billion target.
This is evidenced by the collection of US$4,3 billion in the first five months of 2026, against a target of US$2,95 billion.
Similarly, the external sector remains robust; the current account recorded a surplus of US$616,3 million in the first quarter of 2026, a significant increase from the US$22,5 million deficit in the same period last year.
At the current rate of forex generation — US$16,2 billion in 2025 and US$10,7 billion in the first half of 2026 — achieving three to six months of import cover is highly attainable.
However, downside risks persist.
The anticipated El Niño-induced drought poses a significant threat to the agricultural sector, which was projected to grow by 6,9 percent.
Despite this, progress in tobacco deliveries (close to 400 million kg thus far, up from 355 million kg last year) provides a buffer.
To offset agricultural vulnerabilities, the mining sector remains highly buoyant, driven by gold and base metals. Gold deliveries are expected to rise to 55,6 tonnes this year, supported by the metal’s safe-haven status and strong global prices.
The lithium subsector has transformed following the ban on the export of raw lithium and concentrates. Consequently, lithium earnings surged by 250 percent to US$782,2 million in the first half of 2026, up from US$237,2 million in the previous year.
Going forward, the macroeconomic priority must remain anchored on entrenching stability, decisively reversing structural dollarisation, sustaining inclusive growth and improving social service delivery to guarantee enhanced livelihoods for all citizens.
*Persistence Gwanyanya is a member of the RBZ Monetary Policy Committee and the founder of Bullion Group. For feedback, email [email protected] or WhatsApp +263773030691.
