Forex allocation sets tone for economic growth

by | Jul 29, 2021 | Business | 0 comments

Hosia Mviringi
The Zimbabwean economy is geared for rapid expansion, on the back of focused foreign currency allocation which prioritises import substitution through local manufacturing growth.
Statistics from the Reserve Bank of Zimbabwe show a tremendous bias towards importation of raw materials and productive capital equipment and machinery, both of which are the two important ingredients needed to grow industrial productive capacity.

Zimbabwe has recently experienced a rapid growth in industrial productivity as represented by a surge in locally produced goods on supermarket shelves.
Local products now account for nearly 70 percent of fast moving consumer goods in supermarket and stores, justifying the need for a reduction in forex allocation towards retail and distribution expenditure.
According to Foreign Exchange Auction Results released July 27, 2021, retail and distribution attracted a meagre US$4,332,677.09 on the main auction against US$14,272,215.75 and US$8,981,866.50 for raw materials and machinery and equipment imports respectively.
Professor Mthuli Ncube, in the true spirit and letter of promoting local production and economic growth as espoused in the National Development Strategy 1 document, has deliberately favoured the manufacturing sector companies with generous forex allocations to enable production of goods locally, which contributes to job creation, import substitution, and direct forex earnings through exports.

Capital equipment imports signify growing confidence in the local economy by investors as numerous capital intensive, long term projects continue to take shape locally in mining, agriculture, construction and power generation.
Tourism continues to find its feet in the face if the devastating Covid-19 pandemic which slowed down travel and leisure activities.

Under NDS1, job creation, import substitution, value addition, technology and knowledge transfer, and human resources development are key deliverables towards an empowered and inclusive economy by 2030.

Transparency and efficiency on the forex auction floor has been hailed by the International Monetary Fund (IMF) as an indicator of dedicated economic policies heading in the right direction.
It has largely contributed to the currency stability as evidenced by rapidly receding annual inflation which came down from 837% in July 2020 to record breaking low of 56% in July 2021.
This marks the first time in two years that a double-digit inflation figure has been recorded.