Weaker Local Currency Drives Economic Growth, Says Mthuli Ncube
Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube has said Zimbabwe has benefited from a weaker local currency, which has promoted economic growth over the past three years.
The Reserve Bank of Zimbabwe (RBZ) recently devalued the domestic currency, the Zimbabwe Gold (ZiG), by 43 per cent after the gap between the official foreign exchange rate and the parallel market rate widened.
The ZiG is the country’s sixth attempt to introduce a stable currency in 15 years and has been depreciating against the United States dollar since its debut in April 2024.
During a signing ceremony of four financing agreements between Zimbabwe and the European Union (EU) in Harare on Wednesday, Ncube attributed the country’s stagnating economic growth for this year to climate change, not the ZiG. He said (via NewsDay):
If your sole reference currency is foreign currency, you need a domestic currency to grow. And that’s what we have in the form of ZiG. And it is supporting economic growth.
Do you think it is surprising that in all the currency volatility we have experienced in the last five years, the Zimbabwean economy has grown at an average rate of 6,8% in the last three years?
How did this happen if currency was such a big deal? And I think it shows and proves to you that having a weaker domestic currency has actually produced more advantages than disadvantages.
And it shows economic growth. And the reason why we have slower growth this year is not because of the currency. It’s actually because of climate change.
What I’m also saying is that, you know, a currency that weakens presents opportunities and advantages to one group of people, but disadvantages to others.
So it is not advantage all the way, but disadvantage all the way. So, for example, if you’re an exporter, after the depreciation of ZiG, suddenly your inflows in ZiG terms have doubled.
So that’s why currency depreciation really supports what we call export competitiveness.
More: Pindula News
