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Treasury launches last-ditch push to stabilise Zimbabwe economy
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Zimbabwe's Treasury has embarked on a last-ditch effort to stabilise the country's fragile economy, amid growing fears that policy inconsistency, inflation, and currency volatility could derail industrial recovery and drive businesses into collapse.
Speaking at the EU-Zimbabwe Business Forum in Harare, Andrew Bvumbe, Head of the Zimbabwe Public Debt Management Office in the Ministry of Finance, Economic Development and Investment Promotion, said the government was prioritising macroeconomic stability to restore investor confidence.
"We are doing all we can to ensure macroeconomic stability and predictability of the economic environment, including reforms in the exchange rate framework, which are critical for investors," Bvumbe said. "Structural reforms in monetary policy and foreign exchange mechanisms are being implemented to ensure a predictable market."
However, despite these assurances, the domestic business landscape continues to deteriorate under mounting pressure. Policy inconsistency, excessive taxation, foreign currency shortages, and complex regulations have triggered a wave of operational cutbacks, with many companies halting expansion plans or exiting the market entirely.
In its latest strategy note, Imara Asset Management painted a bleak picture, warning that Zimbabwe's current economic architecture is "financially disastrous" for borrowers due to high interest rates and a lack of long-term patient capital.
"High borrowing costs in excess of 30% would be prohibitive if the ZWG is to remain stable. Most corporates will struggle to service loans unless they earn in hard currency," Imara stated.
Meanwhile, tensions between businesses and the Zimbabwe Revenue Authority (ZIMRA) over an aggressive tax regime are escalating. Despite Cabinet's pledge to streamline regulations, minimal progress has been made.
The unpopular Intermediated Money Transfer Tax (IMTT), a significant revenue tool for government, remains in force, compounding the strain on private sector players. Furthermore, Treasury is expected to maintain rigid foreign currency surrender requirements, central to its ongoing de-dollarisation efforts.
A 2019 World Bank report previously warned that Zimbabwe's economy suffers annual losses of approximately US$126 million due to production risks, mainly from erratic weather and economic instability—highlighting the urgent need for meaningful investment and reform.
Despite the gloom, some corporates have expressed cautious optimism. Innscor Africa Holdings company secretary Andrew Lorimer acknowledged the benefits of recent monetary tightening.
"The authorities continued to maintain a tight monetary stance. While this constrained liquidity, it brought stability to pricing and improved sentiment," Lorimer said. "We remain hopeful the current monetary discipline will be sustained."
Fidelity Life Assurance echoed similar sentiments. "The RBZ has improved forex availability, and key sectors like agriculture are showing promise. This bodes well for sustained growth," said company secretary Ruvimbo Chidora.
Delta Corporation and Rainbow Tourism Group (RTG) both acknowledged modest progress but warned that high inflation, currency instability, and policy unpredictability continue to weigh heavily on operations.
Reserve Bank of Zimbabwe (RBZ) Deputy Governor Innocent Matshe remained optimistic. He said strong foreign currency inflows, backed by exports, mining, and remittances, were helping stabilise the exchange rate and build confidence in the new Zimbabwe Gold (ZiG) currency.
"The stability we are seeing now can only be sustained. Our goal is to foster local and international trust to make currency a non-issue for business," Matshe said.
He added that the RBZ was avoiding monetising government deficits and had maintained a zero-overdraft policy. As of the latest figures, ZiG deposits stood at Z$16.9 billion - 18% of total money supply.
Despite this, Matshe conceded that the exchange rate must align more closely with international market movements, especially given the gold-backed nature of the country's reserves.
Meanwhile, Confederation of Zimbabwe Industries (CZI) CEO Sekai Kuvarika emphasised the importance of integrated value chains in agriculture and processing sectors as a path toward industrial transformation.
"We're seeing increased investor interest in both production and processing, especially in high-value crops like blueberries and avocados. Integration is boosting efficiency, reducing costs, and improving quality," she said.
She stressed the need for strong public-private partnerships to unlock Zimbabwe's industrial potential - a message aligned with government calls for improving the ease of doing business.
Still, for many firms, Zimbabwe's economy remains precarious. Until structural reforms translate into consistent policy execution and a truly predictable operating environment, business leaders say, optimism will remain cautious - and survival, uncertain.
Speaking at the EU-Zimbabwe Business Forum in Harare, Andrew Bvumbe, Head of the Zimbabwe Public Debt Management Office in the Ministry of Finance, Economic Development and Investment Promotion, said the government was prioritising macroeconomic stability to restore investor confidence.
"We are doing all we can to ensure macroeconomic stability and predictability of the economic environment, including reforms in the exchange rate framework, which are critical for investors," Bvumbe said. "Structural reforms in monetary policy and foreign exchange mechanisms are being implemented to ensure a predictable market."
However, despite these assurances, the domestic business landscape continues to deteriorate under mounting pressure. Policy inconsistency, excessive taxation, foreign currency shortages, and complex regulations have triggered a wave of operational cutbacks, with many companies halting expansion plans or exiting the market entirely.
In its latest strategy note, Imara Asset Management painted a bleak picture, warning that Zimbabwe's current economic architecture is "financially disastrous" for borrowers due to high interest rates and a lack of long-term patient capital.
"High borrowing costs in excess of 30% would be prohibitive if the ZWG is to remain stable. Most corporates will struggle to service loans unless they earn in hard currency," Imara stated.
Meanwhile, tensions between businesses and the Zimbabwe Revenue Authority (ZIMRA) over an aggressive tax regime are escalating. Despite Cabinet's pledge to streamline regulations, minimal progress has been made.
The unpopular Intermediated Money Transfer Tax (IMTT), a significant revenue tool for government, remains in force, compounding the strain on private sector players. Furthermore, Treasury is expected to maintain rigid foreign currency surrender requirements, central to its ongoing de-dollarisation efforts.
A 2019 World Bank report previously warned that Zimbabwe's economy suffers annual losses of approximately US$126 million due to production risks, mainly from erratic weather and economic instability—highlighting the urgent need for meaningful investment and reform.
Despite the gloom, some corporates have expressed cautious optimism. Innscor Africa Holdings company secretary Andrew Lorimer acknowledged the benefits of recent monetary tightening.
"The authorities continued to maintain a tight monetary stance. While this constrained liquidity, it brought stability to pricing and improved sentiment," Lorimer said. "We remain hopeful the current monetary discipline will be sustained."
Fidelity Life Assurance echoed similar sentiments. "The RBZ has improved forex availability, and key sectors like agriculture are showing promise. This bodes well for sustained growth," said company secretary Ruvimbo Chidora.
Delta Corporation and Rainbow Tourism Group (RTG) both acknowledged modest progress but warned that high inflation, currency instability, and policy unpredictability continue to weigh heavily on operations.
Reserve Bank of Zimbabwe (RBZ) Deputy Governor Innocent Matshe remained optimistic. He said strong foreign currency inflows, backed by exports, mining, and remittances, were helping stabilise the exchange rate and build confidence in the new Zimbabwe Gold (ZiG) currency.
"The stability we are seeing now can only be sustained. Our goal is to foster local and international trust to make currency a non-issue for business," Matshe said.
He added that the RBZ was avoiding monetising government deficits and had maintained a zero-overdraft policy. As of the latest figures, ZiG deposits stood at Z$16.9 billion - 18% of total money supply.
Despite this, Matshe conceded that the exchange rate must align more closely with international market movements, especially given the gold-backed nature of the country's reserves.
Meanwhile, Confederation of Zimbabwe Industries (CZI) CEO Sekai Kuvarika emphasised the importance of integrated value chains in agriculture and processing sectors as a path toward industrial transformation.
"We're seeing increased investor interest in both production and processing, especially in high-value crops like blueberries and avocados. Integration is boosting efficiency, reducing costs, and improving quality," she said.
She stressed the need for strong public-private partnerships to unlock Zimbabwe's industrial potential - a message aligned with government calls for improving the ease of doing business.
Still, for many firms, Zimbabwe's economy remains precarious. Until structural reforms translate into consistent policy execution and a truly predictable operating environment, business leaders say, optimism will remain cautious - and survival, uncertain.
Source - Business Times
