Financial institutions remain optimistic on economy
Financial Institutions in Zimbabwe remain confident and optimistic about the stability in the economy, banking on the fiscal and monetary policy interventions implemented by authorities, following a period of exchange rate volatility.
AFC Holdings in its financial results for the half year ended June 30, 2023 said the Group is optimistic that the prevailing stability in the foreign currency market will have a positive impact on the business operations as well as capital preservations.
Chairman, James Mutizwa, said the Group will expand value preservation strategies to ensure sustainability, business growth and profitability.
Chief executive officer, Farai Macheka, added following recent currency reforms by government and monetary authorities, the expectation is for enhanced currency and exchange rate stability and by implication, a more stable environment for business growth.
Another financial institution, Old Mutual Zimbabwe, in its financial statements for the same period, said it remains hopeful in the medium to long term with feasible growth expected riding on the back of developments in the mining, agriculture and energy sectors of the economy.
“We maintain a positive view of the outlook in the medium to long-term, with sustainable growth expected to be anchored by the mining, agriculture, and energy sectors of the economy,” said Old Mutual.
Chairman Kumbirai Katsande said the Group welcomes the efforts of authorities to stabilise the macroeconomic environment and enhance public confidence in the financial services sector.
‘Restoration of public confidence in formal financial intermediaries is critical for sustainable and inclusive economic growth and prosperity,” said Katsande.
At NMB Holdings Limited chairman, Benedict Chikwanha, said the recovery of the agricultural sector, improved power generation and mining activities, ongoing infrastructure projects, and diaspora remittances will underpin a strong economic performance in the second half of the year.
“Going forward, attainment of the macroeconomic stability will be primarily hinged on the continued tight stance on money supply and accelerated liberalisation of the foreign exchange market ,” said NMB.
Old Mutual’s banking unit, CABS, however, said the economic outlook remains uncertain with liquidity and exchange rate volatility coming through as the major risks for business operations.
“However, the Society will continue to provide full banking services to its customers as support to the country’s economic development,” said CABS chairman Washington Matsaira.
Similar sentiments were shared at Nedbank Zimbabwe where managing director, Sibingile Moyo, said the macro-economic environment remains challenging and likely to impact value for the bank’s clients and stakeholders.
Her chairman, Shepherd Shonhiwa, said going forward, attaining macroeconomic stability is key for the economy to continue the growth trajectory.
He said continued deployment of a balanced set of monetary and fiscal policy tools such as the bank rate, and statutory reserve ratios as well as managing borrowing will help to contain currency volatility which has been the major source of inflationary pressures.
‘The recent initiatives, if buttressed by consistency and certainty in policy formulation and implementation will restore market confidence which is essential in maintaining exchange rate stability,” said Shonhiwa.
Commenting on the just ended six months to June 30, 2023 NMB’s Chikwanha said the economy had continued to show signs of resilience and recovery in spite of the economic challenges experienced towards the end of the period.
“However, timely intervention by the authorities resulted in the issuance of both fiscal and monetary policy measures resulting in inflation and exchange rate dissipating leading to general stability in prices. The domestic economy in 2023 is projected to grow by 6 percent compared to the initial projection of 3,8 percent.
AFC said the business environment, during the period to June, was characterized by significant currency volatility, which translated to high inflation rates and high costs as economic agents price to hedge their funds.
“The tough macroeconomic conditions slowed down economic activity in the country, operating costs shot up as most supplies were indexed in US Dollars, and liquidity capital was affected particularly during the second quarter of the year.
“Both the official and the parallel market exchange rates depreciated markedly, fueling inflation,” the bank said.
AFC also said the main drivers of exchange rate volatility during the period under review were the increase in money supply due to multiple factors, including those from the fiscal expansion and financing of the Government.
“On the back of a decline in the use of the local Zimbabwean dollar which is estimated to be less than 25 percent of domestic transactions in the country, Minister of Finance and Economic Development on the 31st of May 2023 and subsequently on the 23rd of June 2023 announced measures aimed at promoting the use of the Zimbabwean Dollar (ZWL) and these resulted in the implementation of tight monetary and fiscal measures that removed excess ZWL liquidity from the market resulting in the slowing down of the inflation and prices,” said the bank.
“The group embraced all the monetary and fiscal policy interventions taken by the authorities and took measures to minimize the impact of the runaway exchange rate on the group’s operations.
Old Mutual welcomed the efforts of the authorities to stabilize the macroeconomic environment and enhance public confidence in the financial sector.
“Restoration of public confidence in formal financial intermediaries is critical for sustainable and inclusive economic growth and prosperity,” the financial service giant said.-ebusinessweekly
