Mnangagwa frets over resurgent black market

In his State of the Nation Address (SONA) delivered during the official opening of the second session of the 10th Parliament in Mt Hampden, President Emmerson Mnangagwa expressed deep concern over the resurgence of the parallel market, which he warned is undermining the newly introduced Zimbabwe Gold (ZiG). He pledged that corrective measures would be implemented to shield Zimbabweans from economic disruptions.

Last Friday, the Reserve Bank of Zimbabwe (RBZ) devalued the ZiG from 14 to 24.3 per US dollar, with the parallel market rate soaring above 35. Mnangagwa emphasized that currency stabilization is critical for macroeconomic stability, highlighting that the ZiG's adoption in April was a significant step towards stabilizing the domestic currency, anchored by gold and precious metal reserves.

"It remains the duty of all of us to respect and abide by measures and instruments intended to maintain economic stability and tame inflation," Mnangagwa stated. He noted that in response to rising foreign currency pressures, the RBZ has allowed greater flexibility under the willing-buyer willing-seller arrangement to deepen the foreign exchange market.

The President reaffirmed the government's commitment to supporting the currency by allocating 50% of mining royalties to build reserves. He reported an increase in foreign currency inflows from exports, rising from US$7 billion in 2023 to US$8 billion in 2024. "Our banking sector is on a sound footing, with sufficient capital and liquidity buffers, while profitability, asset quality, and liquidity matrix have also remained stable," he added.

Mnangagwa also addressed social issues, urging national unity and social cohesion while rejecting divisive tendencies based on regional, tribal, or socio-economic differences. "Tendencies that fuel discord have no place in our nation and must be rejected," he said.

Additionally, the President lamented the impact of the El Niño-induced drought, which has adversely affected all economic sectors, particularly agriculture. He noted that the Grain Marketing Board has established agro-shops in rural areas to enhance food availability at affordable prices. He expressed optimism for the upcoming agricultural season, projecting a record wheat harvest of 600,000 metric tonnes from the 2024 winter crop, supported by effective policy frameworks.

"Water harvesting remains critical to climate change mitigation and adaptation, complementing rain-fed production systems. The full utilization of small dams and weirs, along with efficient conveyancing around larger dams, is a top priority for my administration," Mnangagwa asserted.

On the economic front, he mentioned that the Compensation Committee had approved 94 claims under Bilateral Investment Promotion and Protection Agreements, demonstrating the government's commitment to fair and amicable resolutions.

Economic analyst Stevenson Dhlamini praised Mnangagwa's address for reassuring the nation and investors about the government's commitment to a market-determined exchange rate. "Investors needed reassurance about a flexible exchange rate system. The emphasis on a positive trajectory for export earnings is encouraging and part of measures to support currency stability," he noted.

Overall, Dhlamini highlighted that the SONA reflected policy coherence and consistency, marking a welcome development in Zimbabwe's economic landscape.