In response to the prevailing challenges faced by Zimbabwe’s local currency and in light of the forthcoming general election, President Emmerson Mnangagwa has issued a directive to the central bank, ordering an immediate cessation of foreign currency borrowing. This decisive action aims to mitigate the rapid depreciation of the local currency and stabilize the economic landscape, thus ensuring a more secure financial environment leading up to the upcoming national elections.
As the August 23rd election approaches, President Emmerson Mnangagwa finds himself confronted with a formidable challenge in his quest for re-election. The arduous task is compounded by the escalating inflationary pressures and the significant devaluation of the Zim dollar, surpassing 80% since the start of the year. These pressing economic circumstances pose additional hurdles for Mnangagwa’s campaign, demanding his utmost attention and strategic planning to navigate through these turbulent times and secure the desired electoral outcome.
The central bank’s foreign currency borrowing without parliamentary oversight has been criticized by analysts for worsening Zimbabwe’s currency crisis.
In a recent statement, President Mnangagwa emphasized that the central bank is authorized to borrow foreign currency solely on behalf of the state, under the direction of the Finance Minister, rather than for its purposes. This announcement serves as a directive to curb the practice of independent foreign currency borrowing by the central bank. Previously, the central bank had resorted to borrowing from regional banks to finance essential imports such as fuel, fertilizer, edible oils, and other basic goods.
Zimbabwe has faced hyperinflation and currency volatility for the past 20 years, primarily attributed to poor government economic management and controversial land redistribution policies.