HARARE – Zimbabwe's economic growth will be determined by continued inflows of the United States dollar into the country, Imara Asset Management Zimbabwe (Imara) has said.
Peter Bailey, Imara’s chairperson, said sustained inflows of the greenbacks will drive money supply and in turn business activity.
In 2009, Zimbabwe abandoned its money and adopted a multi-currency system dominated by the United States dollar and South African rand.
Bailey said in the past 12 months, official deposits — a reflection of the country’s money supply — declined slightly as foreign inflows had deteriorated.
This has resulted in the tight liquidity in the country’s economy.
“It will be imperative therefore that the new government works quickly to encourage US dollar inflows in order to improve liquidity in the economy and drive economic growth,” he said.
Bailey noted that on-going negotiations with the International Monetary Fund will be an important factor in this regard.
Following President Robert Mugabe and Zanu PF’s victory in the July 31 election, there have been fears that monetary authorities might prematurely reintroduce the Zimbabwe dollar.
Finance minister Patrick Chinamasa, however, said Zimbabwe will retain the multi-currency regime for the foreseeable future as part of measures to ensure financial stability.
“In order to dispel any doubts on the market, I came back home to maintain the multi-currency regime,” Chinamasa said, adding that “It will be with us, it will remain with us for an indefinite period.”
Zimbabwe’s economy only started to pick up after the multi-currency system was adopted and an inclusive government was formed in 2009, after almost a decade of decline, ruining a formerly prosperous country known as the “bread basket of Africa”.
However, the growth has slowed since 2011.
The government predicts that the economy will expand by merely 3,4 percent this year.