Zimbabwe is going through a rare phase of relative economic ‘calm’. Growth feels steady, inflation has slightly cooled, and the exchange rate is holding, for now. But risks from unpaid debts and a 2030 currency deadline raise questions. In this report, Imara Asset Management CEO Shelton Sibanda and non-executive director John Legat pose a familiar question: can those running the economy resist their old urges: tinkering with the currency and spending money that they don’t have? Excerpts:
By Imara
As far as we can see, the economy remains in great shape and ‘stable’. We are logging historic gold numbers on the back of firmer pricing; record volumes within the tobacco segment and platinum prices have also rebounded extensively.
Exchange rates have been steady while both USD and ZWG inflation have been trending downwards on an annualised basis. Our reading is that financial and economic dollarisation – which is in excess of 85% – has led to the stability and growth we are witnessing.
A free and widespread use of the USD within the economy, accompanied by a non-existent ZWG, has made it easier for corporates and individuals to transact and plan. Let’s not rock the boat. The ZiG portion in monetary aggregates is less than 20%, implying an even smaller amount available for transactions where prices remain exclusively quoted in USD. Yet, fragility remains. Debt levels are unsustainable, and the country is deemed to be in debt distress. On the fiscal side, due to financing pressures, there is an accumulation of domestic arrears now reportedly in excess of US$1 billion.
A speedy resolution of these issues with the creditors will be key. For external debt, creditors require that an IMF Staff Monitored Program (SMP) be in place to unlock potential bridging loans. We do not think we will be having one soon. Globally, Debt/GDP levels also remain high, hence the push by politicians to keep interest rates lower. As a result, the USD has been weaker, and inflation concerns remain. This is, however, positive for commodities and emerging markets equities. A long-overdue rebound was experienced on the VFEX during the quarter.
IMF’s caution
It was interesting to read the IMF’s Staff Report based on their 2025 Article IV consultation with Zimbabwe. Interestingly, although the IMF has written staff reports each year, this was the first to be published since 2022; the Zimbabwe Government was not happy for them to publish the 2023 and 2024 editions, and so we were delighted to receive a copy at the end of August.
The key message the IMF is attempting to convey is the need for Government to manage its expenditure responsibly. In short, to live within its means and its budgets. This is especially the case where there is little concessionary finance available to Zimbabwe, and at a time when donations from the likes of USAID have been significantly reduced or withdrawn altogether.
Unfortunately, over the decades, the Government has become used to spending beyond its means, and whenever funds became short, it would simply borrow from the RBZ, utilising its overdraft. This leads to money creation, which ultimately undermines the currencies that they have printed. In all cases, the excess liquidity created has resulted in a devaluation of the currency of the day, although Government was always quick to blame the private sector and unscrupulous traders for the currencies’ demise.
Keeping a tight lid on the RBZ pot?
Thanks to high budget deficits and more money printing, the ZWL lasted just five years, being replaced by the ZWG or ZiG in April 2025, which was supposedly backed by gold and monetary reserves. Just five months later, the ZWG was halved in value through an official devaluation. The root cause of that devaluation was spelt out in the IMF’s report: “The ZiG monetary base increased by around 215% between the introduction of the ZiG in April 2024 and September 2024, mirroring the RBZ-provided advances to government to service the debt taken over by Treasury.” In short, once again, the RBZ bailed out the Government, which was living beyond its means.
Ever since then, the RBZ has refused to give Government access to its overdraft facility. As a result, there has been negligible money creation, and the currency has stayed stable. Indeed, there is so little ZWG around that it has become relatively extinct as a transactional currency; few players use it, so it has become largely irrelevant.
The recent pronouncement by the permanent secretary in the Treasury to all Ministries to curtail their expenditure suggests too little too late. He will no doubt have seen recent spending numbers as he prepares for the Budget in November. He will also have read the IMF report calling for fiscal discipline, or else. This is precisely why we remain sceptical of the announced intentions to reduce levies, fees and other attendant charges that inflate business costs. We are not sure how Treasury (Ministries, Departments, and Agencies) will fully plug the gap created by a cessation of these taxes. In fact, to date, there has been no instrument issued to create a legal backing to the announced changes.
Given the Government’s record since 1997 to call on the central bank to bail it out when required, the IMF, in its latest strongly worded report, has warned Government that it needs to live within its means, which it has clearly not been doing. The IMF also revealed that Government debt had expanded from US$21.1 billion to over US$23.3 billion at the end of 2024. In their report, the IMF classifies Zimbabwe’s debt situation as ‘unsustainable and in distress’. Some of this increase is the result of monies that it still owes suppliers for work already done. Road builders spring to mind. We also understand that the RBZ is refusing to create ZWG to cover the surrender requirements of the exporters. With platinum prices having nearly doubled since the start of the year and gold up in excess of 50%, Government’s ZWG liabilities will be increasing sharply but without the ZWG tax revenue to cover it. We watch this space with interest.
Source: NewZwire
