Zimbabwe Central Bank Statement

Author: | Published: 5 Sep 2017
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Zimbabwe has enjoyed positive real growth rates since adopting a dollarization/multi-currency system in 2009. This was after the economy experienced a decade of socio-economic challenges, which culminated in the hyperinflation of 2006-2008. The economy is projected to grow by 3.7% in 2017, and to gradually edge towards double digit growth levels within the next seven years. Growth in the outlook period is largely hinged upon developments in agriculture, mining, tourism and services. The agricultural sector is the anchor of the economy, given its vast forward and backward linkages with the rest of the economy, whilst the mining sector is the major foreign exchange earner.

The resilience of the Zimbabwean economy is underpinned by its highly skilled and adaptable human capital, as well as its abundant mineral resources. Government has taken measures and structural reforms in mining, finance and legislation to support the productive sectors.

The multicurrency system, which is anchored on the use of a basket of nine selected regional and international currencies as legal tender, has helped to rein in inflation, induce macroeconomic discipline and retain measures of consumer and business confidence, ensuring stability and growth. The US dollar is the dominant currency for transactions and settlements. The strong appreciation of the dollar versus the regional currencies, during the period January 2015 to February 2016, however, affected the country's predominantly primary oriented exports, resulting in mismatches between export receipts and rising import bill. Government and the Bank are therefore putting in place measures to deal with this mismatch.

The country's diversified banking sector has remained sound and resilient on the back of various macro prudential measures being implemented by the Reserve Bank to bolster confidence and promote the stability of the sector. In 2016, nearly all banks recorded profits, were compliant with the minimum capital requirements, and maintained sufficient liquidity buffers to withstand emerging challenges. Asset quality has also improved satisfactorily, owing to measures taken to resolve the problem of non-performing loans (NPLs). The NPLs ratio was reduced from a peak of 20.5% in 2014, to 8.5% by March 2017, and the target of 5% and below is well within reach.

The Reserve Bank has instituted measures to improve the credit environment through the establishment of credit and collateral registries; enforced the minimum requirements of Basel II/III; and formulated guidelines on the implementation of the International Financial Reporting Standard 9 (IFRS9).

To further buttress growth and stability, the government has continued to engage the international financial institutions (IFIs), which has seen the country successfully implement an IMF Staff Monitored Programme (SMP) and clear arrears with the IMF. The programme to clear arrears with the rest of the IFIs and other external creditors is well on course.

This re-engagement process is a critical gateway to reducing the country's risk premium, unlocking much-needed concessional financing and attracting foreign capital inflows for the country's productive sectors. The outlook for the Zimbabwean economy is bright, anchored on the current structural reform measures being implemented by authorities to address fiscal deficit, current account deficit and low productivity. The economy is thus geared for successful revival and transformation resulting in sustainable inclusive growth and development.




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