Zim Economy In Better Position – Guvamatanga
Zimbabwe’s economy is in a far better position than it has been in a long period, according to the Permanent Secretary in the Ministry of Finance and Economic Development Dr George Guvamatanga.Zimbabwe now has a strong external sector position, with total foreign currency available totalling about 10 months import cover, and the healthy fiscal and monetary situations as evidence.
The Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Panonetsa Mangudya last week held meetings with business leaders and reached a number of concessions to deal with exchange rate instability on the black market and its potential negative effect on price, as this could put many goods and services beyond the reach of low income groups.
The central bank highlighted that there was no basis for exchange rate volatility in an environment where the key fundamentals were strong. The bank shared similar sentiments as Mr Guvamatanga that the issues affecting the exchange rate centred on behaviour not economic factors.
Earlier this month, the bank named and shamed a number of individuals allegedly abusing mobile bulk payer lines to illegally trade in forex, thereby fanning rate instability.
Exchange rate volatility, reined in when the Reserve Bank of Zimbabwe launched the foreign currency auctions last year, helped in the discovery of a market rate, stabilised prices and inflation; but some price increases have lately threatened to dilute the gains.
Perm-Sec Guvamatanga said,
“So, we have also been fortunate to receive special drawing rights or the SDRs from the International Monetary Fund. So, if you . . . look, the US$1,7 billion that is sitting in foreign currency accounts, you take the US$1 billion we have received as well from the IMF and you add to the Forex cash in circulation in Zimbabwe, we easily have US$3,5 billion, US$4 billion of cash.
“And if we were to convert that into import cover , that is more than 10 months of import cover; so Zimbabwe’s external position is very strong right now.
This dovetails into the forecast by Finance and Economic Development Minister Mthuli Ncube that the economy will grow by 7,8 percent this year, revised upwards from 7,4 percent predicted in November last year, driven by a bumper harvest, decent global metal prices, hence strong exports, and more construction happening across the country.
Mr Guvamatanga said the balance between the key economic fundamentals would, ordinarily, lead to a more stable and stronger exchange rate, contrary to what is happening where the local unit lost some ground against the greenback on the black market.
While the exchange rate remains largely stable on the formal market at about $88 per US$1, the rate has depreciated to as high as $170 per US$1 on the black market, at the seller’s rate, which is far higher than the buyer’s rate. However, the black market appears to have peaked and started retreating slightly.
Mr Guvamatanga said the authorities were aware of the factors causing the volatility and were in the process of fixing them.