Weak currency key to economic growth, says Mthuli Ncube

Finance, Economic Development and Investment Promotion Minister Mthuli Ncube has defended Zimbabwe's weak domestic currency, asserting that it has played a crucial role in fostering economic growth. Speaking at a signing ceremony for four financing agreements between Zimbabwe and the European Union (EU) in Harare, Ncube stated that the economy has experienced an average growth rate of 6.8% over the past three years.

His remarks come as the government's newly introduced currency, the Zimbabwe Gold (ZiG), faces depreciation against the United States dollar since its launch in April, marking Zimbabwe's sixth attempt to stabilize its currency in 15 years.

Ncube attributed this year's slower economic growth not to the ZiG, but to the impacts of climate change. "If your sole reference currency is foreign currency, you need a domestic currency to grow. And that's what we have in the form of ZiG. And it is supporting economic growth," he said.

He emphasized that despite recent currency volatility, the average growth rate achieved over the last three years indicates that a weaker domestic currency can yield more benefits than drawbacks. "Do you think it is surprising that in all the currency volatility we have experienced in the last five years, the Zimbabwean economy has grown at an average rate of 6.8% in the last three years?" Ncube queried, highlighting the resilience of the economy.

The minister elaborated on the dynamics of currency value, noting that while a depreciating currency can pose disadvantages for some, it creates opportunities for others, particularly exporters. "For example, if you're an exporter, after the depreciation of ZiG, suddenly your inflows in ZiG terms have doubled. So that's why currency depreciation really supports what we call export competitiveness," he explained.

During the ceremony, Ncube announced the signing of four financial agreements totaling €75 million (approximately US$80 million) aimed at advancing development projects in Zimbabwe. EU Ambassador to Zimbabwe Jobst von Kirchmann stated that the funding would focus on accelerating the green transition through support for agricultural value chains, renewable energy investments, biodiversity conservation, and building community resilience.

The financing agreements represent the second phase of funding under the EU's €148 million (US$160 million) allocation to Zimbabwe's Multi-Annual Indicative Programme for 2021-2024. Von Kirchmann emphasized the alignment of the EU's Global Gateway priorities with Zimbabwe's National Development Strategy 1, aiming to address immediate needs while empowering citizens, especially women and youth, to build a resilient society and economy.

Specific allocations from the funding include €28 million (US$30.4 million) for agri-value chain support, €26 million (US$28.2 million) for biodiversity enhancement and resilience building, €16 million (US$17.4 million) for transparency and accountability initiatives, and €7 million (US$7.6 million) for gender equality and women's empowerment programs.

As Zimbabwe navigates its economic challenges, Ncube's statements highlight the government's focus on leveraging its domestic currency to stimulate growth while addressing broader socio-economic issues through international partnerships and support.