KEY POINTS
- President Mnangagwa allocates 50 percent of mining royalties to support the ZWG currency.
- The government issues a stern warning to forex dealers to prevent economic disruption.
- Measures include greater flexibility in the forex market and backing the ZWG with mining royalties.
President Emmerson Mnangagwa has pledged 50 percent of Zimbabwe’s mining royalties to back the nation’s struggling currency, the Zimbabwe Gold-Backed (ZWG), and issued a stern warning to those engaged in parallel market activities.
He made these announcements during his State of the Nation Address (SONA) to mark the second session of the 10th Parliament, highlighting measures aimed at stabilizing the economy.
Mining royalties to support currency stability
Mnangagwa committed to using 50 percent of mining royalties to shore up the devaluing ZWG. This move is intended to address growing public concern over the depreciation of the currency, which has seen its parallel market value fall to ZWG30 per U.S. dollar.
“Government remains committed to backing the currency through setting aside 50 percent of royalties for building reserves,” Mnangagwa said.
The president also highlighted an increase in foreign currency inflows, stating that earnings from exports had grown from $7 billion in 2023 to $8 billion in 2024. He reassured citizens that the country’s banking sector remains stable, with adequate liquidity and capital buffers, as well as sustained profitability.
However, Mnangagwa expressed concern over the resurgence of parallel market activities driven by speculation. He stressed that corrective measures are being implemented to protect Zimbabweans from economic instability and urged all citizens to comply with economic measures to maintain stability and prevent inflation.
Measures for economic stabilization
The president called on parliamentarians to support the embattled ZWG, describing it as key to Zimbabwe’s macroeconomic stability. According to New Zimbabwe, he also reiterated the importance of respecting the instruments and regulations that are aimed at promoting economic balance.
In his address, Mnangagwa leaned on measures taken by the Reserve Bank of Zimbabwe (RBZ), which have allowed greater flexibility in the foreign exchange market. This includes adopting a willing-buyer willing-seller model to enhance price discovery and encourage more participation in the formal forex market.
These initiatives, despite facing criticism from business stakeholders, are seen by the government as essential to addressing the ongoing economic crisis.
Mnangagwa also emphasized that Zimbabwe must work towards laying a “solid foundation for economic prosperity, peaceful development, and freedom from undue external interference.” He believes that these reforms will support the nation’s broader objectives of achieving long-term economic stability.
Addressing market concerns
Mnangagwa’s bold approach comes amid rising frustration over the currency’s depreciation, with stakeholders from the business community pointing out that recent interventions could complicate the already tough situation. Despite the skepticism, the government remains confident in its measures.
The president’s warning to parallel market traders signals the government’s determination to curb activities that undermine economic stability.
He has vowed to enforce compliance with the measures put in place and stressed that failure to do so would not be tolerated. He also assured that more efforts will be made to protect all Zimbabweans from disruptions to their economic lives.
With the RBZ’s increased flexibility in the forex market and the allocation of mining royalties, the government aims to maintain price stability, boost reserves, and create a more predictable economic environment. Zimbabwe’s economy has faced several hurdles, including challenges related to currency stability, and Mnangagwa’s latest move seeks to stabilize the situation and foster confidence in the financial system.
