A massive stimulus of up to US$1,3 billion, which will boost the economy, is expected to be administered to Zimbabwe when the country starts drawing down its special allocation of new Special Drawing Rights most likely from this week.
This stimulus comes at a time investor confidence in Government policies is high as demonstrated by a strong performance by the Zimbabwe Stock Exchange (ZSE).
The SDR is an international reserve asset created by the International Monetary Fund (IMF) in 1969 to supplement its member countries’ official reserves. So far since then, SDR204,2 billion (equivalent to about US$293 billion) have been allocated to members, including SDR182,6 billion allocated in 2009 in the wake of the global financial crisis.
Zimbabwe used about $140 million to pay down part of the IMF debt.
Analysts told The Herald yesterday that the deliberate decision by the Government to invest in key infrastructure such as roads, water and electricity, has also convincing investors that the Second Republic was open for business.
Information from the ZSE shows that the All Share Index surged 261,28 points (5,05 percent) to close last Friday’s trade at 5,436.39 points, marking its best day since January 2021.
Major gains were spurred by British American Tobacco which jumped $51 up to $800 while Meikles Limited and Innscor Africa finished the week on a bullish trend at just over $78 and $90 after gaining just over $6 and $5 respectively.
Other listed companies that gained were Proplastics and Axia Limited, although marginal losses were recorded in FBC Holdings, NMB Bank, General Beltings Holdings, Nampak and Unifreight.
The market capitalisation is about $16,5 billion.
Economists said the stock market, which is a bellwether for investor sentiment, is showing that the market is gaining increasing confidence in the economic policies of President Mnangagwa’s administration.
The stock market primarily acts to discount the future, where if the market feels the future is bright, the stock market rallies and vice versa, and analysts feel that investors are happy with the economy’s future prospects.
“The market is particularly happy about the market friendly and market-based policies advanced by President Mnangagwa and the Minister of Finance (and Economic Development) Professor Mthuli Ncube,”
said an analyst who preferred anonymity.
“The policies, while bitter at the beginning, have started to show their sweet harvest as the country is enjoying balanced books as a first in a long time.”
Economist Mr Eddie Cross said:
“It is clear that the actions of the State since the start of the Second Republic in 2018 have created greater stability and predictability, “We now have macroeconomic stability and monetary policy has been tightened with the result that inflation has declined to 1 percent a month and we have a stable exchange rate based on the weekly auction. “These major measures have been reinforced with respect for the rule of law and property rights and these measures have started to restore investor confidence.”
Mr Cross said if the country sticks to the policies being followed at the moment, the challenges of deteriorating infrastructure could be overcome.
“I think we can sustain high levels of growth and development for many years. “However, we have to continue to liberalise our exchange rates to reflect real market conditions and to secure investor rights. “We must be very careful not to become uncompetitive by unrealistic wage and salaries policy,”
said Mr Cross.
Another economist, Mr Persistence Gwanyanya said:
“The performance of the Zimbabwe stock exchange is a vote of confidence in the current polices to rebuild the economy. “Remember stock market investors are more informed and sophisticated than the ordinary economic man on the street and their behaviour is something we can rely on to gauge the progress on the economy. “There has been tremendous progress in the economy especially currency and price stability itself driven by fiscal and monetary responsibility. The new economic management team seems to be more determined and serious about addressing the economic challenges.”
Mr Gwanyanya said while the economy has not arrived where “we want to be”, the direction being taken is “inspiring”.
“It seems we have now gotten the basics correctly. The RBZ has since indicated its commitment to dealing with blocked funds and going forward, the proper functionality and efficiency of the auction system seems to be providing the reason to believe again,”
said Mr Gwanyanya.
Already, the RBZ has started dealing with auction settlement backlogs and the target is to reduce the settlement period to standard 14 days from allocation.
In addition, there has been a
on electricity and the fuel situation, said Mr Gwanyanya, adding that progress on infrastructure development, especially road construction, is
“Importantly our Government is now leaving within means. Fiscal deficits were reduced from more than 10 percent of GDP to SADC benchmark of 3 percent of GDP.“Overdraft on RBZ has been reduced from more than 60 percent of budget to nil. Wage bill has been reduced from more than 90 percent of revenue to around 50 percent. All these point to improved economic management and hence, the vote of confidence by the ZSE,”
said Mr Gwanyanya.
Going forward, Mr Cross said Zimbabwe must continue to re-engage with the international community to get access to financial and product markets.
In addition, Zimbabwe must work on all key enablers such as electricity, water, sanitation, health, education, rail and road systems as well as air transport, he said.
“Without these our growth will be strangled and as the economy grows our demand for everything is going to multiply,”