A strong external sector performance has seen foreign currency receipts growing by 23 percent this year to surpass the US$10 billion mark for the first time in the country’s financial history.
According to figures presented by RBZ Deputy Governor Innocent Matshe at the Post-Budget Breakfast Meeting held last week, the country generated US$8 billion in foreign currency receipts last year and the exponential growth continued this year, with US$10 billion by the end of November.
The key drivers of the significant growth in foreign currency receipts include mineral commodities such as gold and platinum group of metals, tobacco and diaspora remittances.
Proceeds from exports contributed US$6,5 billion of the amount while diaspora remittances and NGOs contributed US$1,36 billion and US$951 million, respectively.
This has left economic analysts convinced that the country is now in a better position to build forex reserves sufficient to defend the exchange rate ahead of a very demanding 2023 financial year.
“These financial statistics are very encouraging in that they are moving to consolidate gains which the country had realised in terms of foreign exchange market stability. This also means that funds are available to Zimbabwe for the importation of essentials,” said Mr Batanai Matsika, an economic analyst.
Rising diaspora remittances
Zimbabwe is currently experiencing a positive current account, prompted by improved value of exports of both goods and services, as well as international transfers of capital since 2019. The developments have been underpinned by firming global commodity prices and rising diaspora remittances.
Economist Tinevimbo Shava said: “It just shows how the Minister of Finance (Prof Mthuli Ncube) has moved to give the economy an enabling environment for businesses to export and increase foreign currency receipts.
“Such a trend will surely make us achieve our growth targets and move towards Vision 2030.”
The economists believe the availability of the greenback will culminate in enhanced stability of the local currency, which will trigger the economy’s competitiveness against its regional counterparts.
In the same vein, the Reserve Bank of Zimbabwe (RBZ) has encouraged businesses to promote use of the local currency to strengthen its demand, saying this is critical in driving sustainable economic growth in line with the National Development Strategy 1 (NDS 1).
Speaking during the NDS 1 outreach workshop held in Harare recently, RBZ Economic Research Policy principal economist Dr Stephen Moyo said using the local currency will help in terms of domestic resource mobilisation for infrastructure development projects, which will save the country from creating debt. He said the central bank will continue to come up with measures to back the local currency.
“We encourage businesses to embrace use of the local currency and push for aggregate demand,” said Dr Moyo.
“The local currency is very important. We believe that the local currency is key to sustainable economic growth,” he added.
Dr Moyo said, through use of the local currency, which has been mobilised through various taxes, the Government has managed to implement several huge projects, which include construction of dams and roads, as well as the rehabilitation of some roads and irrigation schemes.
Analysts are also confident the country’s financial sector, which remains in a safe and sound condition, will be able to underwrite the internal resource mobilisation drive, which will provide significant economic activities to sustain the envisaged growth trajectory.
“Capital formation is the backbone of any economy and it becomes sweeter when its domestic resources are driving the development trajectory because it brings sustainability to the equation,” said investment analyst Martin Nyarenda.
“The country is witnessing a decreased rate of capital flight because, from the Government to the private sector, there is the utilisation of domestic resources, which helps in creating value for every dollar that is generated locally and this is a positive development,” said Dr Prosper Chitambara, a development economist.
Economists and analysts have noted the economic significance of continued creation by Zimbabwe of alternative stable financial instruments that generate more economic value, which has led to record-breaking foreign currency receipts. – Sunday Mail
