The economy in a better position: Treasury
From Golden Sibanda to Dubai, United Arab Emirates
Zimbabwe’s economy is in a much better position than it has been for a long time, said Finance and Economic Development Secretary George Guvamatanga, citing the strong position of the external sector, with a total of foreign exchange available totaling about 10 months of import coverage, and the correct fiscal and monetary situations as proof.
This dovetails with forecasts by Minister of Finance and Economic Development Mthuli Ncube that the economy will grow 7.8% this year, revised up from the 7.4% forecast in November of the last year, driven by a bumper harvest, decent world metal prices, resulting in strong exports and more construction across the country.
Mr Guvamatanga said that the balance between the main economic fundamentals would normally lead to a more stable and stronger exchange rate, unlike what is happening where the local unit has lost ground to the greenback on the black market. .
While the exchange rate remains largely stable in the formal market at around $ 88 to US $ 1, the rate has depreciated to $ 170 to US $ 1 on the black market, at the seller’s rate, which is fine. higher than the buyer’s rate. However, the black market appears to have peaked and has started to decline slightly.
Guvamatanga said authorities were aware of the factors behind the volatility and were in the process of correcting them.
The RBZ last week held meetings with business leaders and secured a number of concessions to deal with the volatility of black market exchange rates and its potential negative effect on prices, as this could put many goods and services beyond the reach of low-income groups.
The central bank stressed that there was no basis for exchange rate volatility in an environment where key fundamentals were strong. The bank shared the same sentiments as Mr. Guvamatanga that the problems affecting the exchange rate centered on behavior and not on economic factors.
Earlier this month, the bank named and humiliated a number of individuals who allegedly abused mobile bulk payment lines to illegally trade currencies, fueling rate instability.
Exchange rate volatility, contained when the Reserve Bank of Zimbabwe launched currency auctions last year, has helped uncover a market rate, stabilize prices and inflation; but some price increases recently threatened to dilute the gains.
Speaking in an interview with The Herald in Dubai, United Arab Emirates, after visiting the Zimbabwe pavilion at Expo 2020 Dubai, Mr. Guvamatanga said the fact that the economy is in better shape than it hasn’t been for a long time would be an understatement.
“To say we’re in a better position is actually an understatement. I think we are in a very good position. I think if you look at our trade figures, which was released by the monetary authorities, who provided the figures as of August 7th, actually show that our exports have grown by over 36% year-on-year, largely thanks to strong global commodity prices as well as inflows from the diaspora, ”Guvamatanga said.
The growth in exports, Guvamatanga said, has enabled Zimbabwe to register a positive external sector position. While imports have grown similarly during this period, their increase has been slower than inflows of US $ 5.4 billion and exports of around US $ 3.8 billion.
The national treasurer said that this scenario resulted in a surplus of over US $ 1.7 billion on the current account, which was available in banks as “hard currency”. We hold over US $ 1.7 billion, so this is the strongest international investment position we have had in many years.
“Thus, we were also fortunate to receive Special Drawing Rights or SDRs from the International Monetary Fund. So if you. . . look, the US $ 1.7 billion that is in foreign currency accounts, you take the US $ billion that we also got from the IMF and you add to the Forex cash in circulation in Zimbabwe, we easily have 3, US $ 5 billion, US $ 4 billion in cash.
“And if we were to convert that to import coverage, that’s over 10 months of import coverage; Zimbabwe’s external position is therefore very strong at the moment.
“On the tax front, I think we’ve been living within our means for three years. As a government, we did not borrow from the Reserve Bank in any way, which was actually our problem in the past. We haven’t even borrowed a single dollar from the Reserve Bank, he said.
Mr. Guvamatanga said Zimbabwe is currently in a strong external position, a healthy fiscal position and a strong monetary position.
“All of these signs, under normal circumstances, should actually lead to a strong exchange rate, not some of the instability that we have seen in the market, but we know what drives instability and we do. let’s deal with these problems, “he said.
Mr. Guvamatanga said Zimbabwe has come a long way in terms of managing exchange rates, culminating in the adoption of the weekly auction system, which was said to be a price discovery system on an “open market” .
“We are also seeing a fairly large range of Zimbabwean products now available in our stores and on the shelves of most retail outlets,” Guvamatanga said.
Commenting on Expo 2020 Dubai, Mr. Guvamatanga said Zimbabwe had a land reserve that was ripe for organic food production. He said the country has the capacity to produce enough food to feed the whole world with organic food.
“So this is an area of interest within agriculture, where I would expect investors to go and invest. We also have renewable energy opportunities.
“Obviously we have other sources of energy, hydraulic, thermal and solar, but we actually want to see more investors come in and invest in the renewable energy sectors.
“We can talk about mining all day long, in terms of the opportunities available in Zimbabwe and our wealth in various key minerals as a country, so there are very strong opportunities. The inquiries that have reached ZIDA are very well distributed across all different sectors of the economy. “
He congratulated the general commissioner of Expo 2020 Dubai, Ambassador Mary Mubi, for setting up a superb display in the pavilion.