By Nathan Guma
FINANCE Minister Mthuli Ncube has told investors attending the Zimbabwe Investment Summit in Johannesburg, South Africa that the country has had a stable financial system over the past years, but this is contrary to official statistics by the World Bank.
The summit aimed at bringing together leading business figures to showcase the positive developments and investment opportunities in Zimbabwe.
In his speech, Ncube said Zimbabwe has maintained a stable financial environment.
“Ladies and gentlemen, despite the daunting circumstances globally, the Zimbabwean financial system has remained largely stable, albeit some risks that include climate change, the lagged impacts the Covid-19 pandemic, exchange rate and interest rate risks, among others,” he said.
“Since 2021, the economy has been on a positive growth trajectory with real GDP growth of 8.5% in 2021, 6.5% in 2022, estimated growth rate of 5.5% in 2023 and the growth rate isprojected slow down to 3.5% in 2024, owing to climate change disruptions resulting in drought and floods happening unprecedentedly.
“This growth trajectory is in line with our economic print, the NDS1 targets, notwithstanding significant external global shocks which were experienced during this 3-year period.”
However, statistics have shown that Zimbabwe has been on a turbulent track since 2018, with consistency only being realised between 2010 and 2017.
In April, the government introduced the ambitious Zimbabwe Gold (ZiG) currency, backed by gold and other precious minerals.
However, the ZiG has plummeted on the parallel market, trading at US$1:21ZiG, while the official rate is pegged at US$1:13.56ZiG.
This is despite authorities’ repeated shrill assurances that ZiG is backed by gold and foreign exchange reserves. ZiG has been received with widespread skepticism and cynicism, with the public saying it is just another Zimbabwean dollar version by another name.
The currency has suffered instant ridicule and rejection in the process, crashing market confidence in it. Without confidence and trust, as well as key basic characteristics of money like convertibility and acceptability, ZiG is doomed.
“Government has recently introduced a structured currency anchored on the following policy measures: – a) adoption of a market-determined exchange rate system; b) Efficient and optimal money supply management; c) Introduction of a new structured currency; d) anchoring local currency on reserves backed by gold and foreign currency balances; and e) other support measures and obligations in response to market demands.
“It is envisaged that implementation of the policy measures will provide some resilience in the economy against both domestic and global shocks and headwinds, and ensure a continues downward trend in inflation.”
As reported by The NewsHawks, while the authorities claim ZiG is backed by US$100m in foreign exchange reserves and 2.5 tonnes of gold valued at US$185 million, they have been running around in panicky mode to defend the currency which is fast-losing ground to base currencies, especially the United States dollar that overwhelmingly dominates the market. Some of the rigid controls they have imposed in the market include a practically fixed exchange rate, aggressive mopping up of liquidity through market instruments, low bank withdrawal limits and virtual price controls.
Foreign Direct Investment
The country has been struggling to attract direct foreign direct investment, amid a deepening worsening socio-economic crisis that has seen a massive drop in standards of living.
For instance, in 2022, Zimbabwe attracted US$320 million in foreign direct investment, a drop from US$718 million in 2022.