Zim can stay the course of stability, says Old Mutual

Nelson Gahadza

Senior Business Reporter

Old Mutual Investments Group (OMIG) says authorities need to continue implementing measures to stabilise the economy including by building foreign reserves, improving market confidence, and reducing external debt levels for sustained stability and growth.

This comes as the economy has witnessed a stable environment in recent weeks, which has also culminated in the continued strengthening of the Zimbabwe dollar against the US dollar following a series of policy interventions put in place to mop up excess local currency liquidity.

The recent strategic interventions introduced by authorities include a directive for all import duties to be paid in Zim dollars, except for luxury items; the transfer of external payment obligations from the Reserve Bank of Zimbabwe (RBZ) to the Treasury; and the introduction of the wholesale foreign currency auction for banks.

Further, the Treasury has also directed that all Government institutions collect fees and charges in the local currency and that 50 percent of corporate tax payments be made in Zimbabwe dollars, while the central bank raised its bank policy rate from 140 percent to 150 percent.

In its monthly economic brief for June 2023, OMIG said sustained economic recovery will require a combination of political stability, comprehensive reforms, and measures to attract foreign investment.

“Only through proactive and effective policies can the country overcome its economic challenges and achieve sustainable growth,” it said.

The Government projected local economic growth of 6 percent this year, up from initial forecasts of 3,8 percent, and this comes on the back of improved agricultural performance and increased electricity availability.

Zimbabwe last month secured a US$400 million facility from the African Export-Import Bank (Afreximbank) to boost its economy and facilitate essential developmental projects.

According to Old Mutual the financial package will play a crucial role in supporting the country’s efforts to address the prevailing economic challenges and promote sustainable growth

According to the Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya, the facility from Afreximbank would help buttress the Government’s measures in stabilising the exchange rate.

In its report, OMIG said the financial package is expected to play a crucial role in supporting the country’s efforts to address the prevailing economic challenges and promote sustainable growth.

“Authorities cited the need for foreign currency resources to augment the measures that the Government has put in place to stabilise and grow the economy. The Afreximbank facility offers a lifeline aimed at addressing pressing issues such as infrastructure development, trade finance, and foreign currency shortages, and overall, the Afreximbank facility is a positive development for the country,” reads the report.

Experts also believe prudent liquidity management remains key to taming inflation and exchange rate movements in the short to medium term. The industry also contends that the general improvements in power supply bode well if sustained, as they will limit disruptions to operations as well as reduce operating costs.