‘Zim economy now in growth phase’

Business Reporter

The GOVERNMENT is now preoccupied with ensuring that the current economic stability, which is anchored in strong economic fundamentals, is sustainable, Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya has said.

According to the Zimbabwe National Statistics Agency (ZimStat), Zimbabwe’s economy grew by 8 percent last year.

Exports continue rising, while the fiscal deficit remains below 1,5 percent.

After the recent volatility in financial markets, the exchange rate — the major inflation driver — has since stabilised.

Before the introduction of measures to stabilise the economy, the official exchange rate had depreciated to US$1:$6 926 on the formal market and plunged to as low as US$1:$8 500 on the parallel market.

The Zimbabwe dollar has, however, firmed considerably on both markets.

By last week, the local unit had appreciated to US$1:$4 517 on the formal market and US$1:$6 000 on the open market.

The interventions since May 2023 included increasing the bank policy rate to discourage speculative borrowing, collection of import duties in the Zimdollar, transfer of external payment obligations to the Treasury and settling 50 percent forex corporate tax in the local currency.

Dr Mangudya said the benefits of a stable currency had to trickle down to ordinary consumers for inclusive growth.

“Some people would question, ‘If the fundamentals are strong, why do we not feel it?’ We now need to ensure we have inclusive economic growth; growth with equity.

“The fundamentals are so strong; if you look at our growth rates, export performance, national budget performance, the current account, the fundamentals are so strong,” he said.

Zimbabwe’s economy is projected to grow by 5,3 percent this year, better than initial estimates, on the back of improved agricultural production, better electricity supply and firm mineral prices, according to the Ministry of Finance and Economic Development.

But the International Monetary Fund, the World Bank and the African Development Bank expect the economy to expand by 2,5 percent, 3,6 percent and 2,8 percent, respectively.

Dr Mangudya said he was confident the economy was now in good shape to sustain strong growth, going forward.

He, however, said he understood those who were naturally sceptical, as people had lost value in 2008 and 2019.

Going forward, after stabilising the Zimdollar, he added, the challenge was to manage “expectations”.

“This country is not a complex economy, but the people are complicated because of the historical past. People use history to think forward,” he said.

“We need to consistently stay the course. Once we consistently stay the course, this will build confidence. The solution, strategy and call for us as regulators and Government is that we need to stay the course of what is working.”

Dr Mangudya also commented on the high cost of money, which businesses have also been fretting about, especially after RBZ hiked its bank policy rate from 140 percent to 150 percent to discourage speculative borrowing.

“We are going to look at our inflation focus. Our interest rate policy is dependent on projected inflation. So, we are just finalising our projections; that is what determines the interest rate.”