Harare – Zimbabwe’s foreign currency reserves held by financial institutions stand at US$1,2 billion, up from US$800 million at the end of 2020.
In an interview this week, Reserve Bank of Zimbabwe Governor Dr John Mangudya said the rise in foreign currency deposits was due to better export revenues, investment income and diaspora remittances, among other factors.
“The growth is good and shows that there is confidence in the market and people are banking their money. That money can now be used to propel the economy. So it’s good for the economy, for the banking sector, it’s good for the people and it’s good for investors as they can now borrow to finance the operations,” Dr Mangudya said.
As recently as three years ago, Zimbabwe faced an acute shortage of foreign currency that resulted in a freefall of its local currency, leading to a short supply of fuel, grains and medicines.
However, a combination of fiscal and monetary policy measures by President Emmerson Mnangagwa’s government have been stabilising the economy, as also seen in the drop in inflation.
Zimbabwe’s inflation, which peaked at 875.55 percent in May 2020, has been on a downward trend since the government allowed the local currency to float while introducing a foreign currency auction system.
The exchange rate, which was previously largely influenced by the black market, has moved from US$1 to ZW$25 to stabilise at around US$1:ZW$84.
Dr Mangudya added that the confidence in the market was also seen from the financial statements being released by companies which was generally showing a rise in profitability.
Information from the Zimbabwe Stock Exchanges showed 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
Zimbabwe’s economy is expected to grow by 3,1 percent this year on the backdrop of a good summer agriculture season that bodes well with much of the country’s economic activities.