MARKET jitters that have troubled the economy since January will cool off as the US$1 billion Special Drawing Rights (SDRs) injection from the International Monetary Fund (IMF) flows into the economy to back up available forex stocks, FBC Holdings Limited said this week.
FBC chairman Herbert Nkala, who commented on the injection in financial results for the half year ended June 30, 2021 struck an optimistic tone, discounting the worsening exchange turmoil experienced recently.
In one of its longest losing streaks, the Zimbabwe dollar has received its worst battering on the dominant parallel market in the past few weeks, falling to about US$1:ZW$180 on Friday, from about US$1:US$120 in January.
The currency has also significantly tapered off on the foreign currency auction system, depreciating to US$1:ZW$86 after holding its ground throughout last year at about US$1:ZW$85.
The shocks have triggered fresh market jitters as companies continue to struggle to access cheaper foreign currency on the auction system, which at one-point last month accumulated US$200 million in backlogs.
But echoing sentiment heard from most financial institutions and manufacturing companies, the FBC boss said the IMF’s package would help Zimbabwe build up its reserves.
“Economic outlook for the near term is optimistic, anchored on the growth prospects of key economic sectors, a stable inflationary environment and increased foreign currency availability supported by the International Monetary Fund Special Drawing Rights allocation,” Nkala said.
“Downward risks relate to the possible resurgence of new Covid-19 variants which pose potential threats to both humanity and economic activity,” added Nkala.
The IMF released US$961 million to Zimbabwe as part of a US$650 billion injected into the global economy to reignite growth following fragilities triggered by the pandemic in 2020.
Last week, Finance Minister Mthuli Ncube laid out a solid spending plan for the package saying sectors hardest hit by Covid-19-induced hard lockdowns would receive maximum attention.
He said productive sectors, including horticulture and manufacturing, as well as infrastructure programmes would be among the most immediate recipients.
But most importantly, the minister said SDRs are accounted for as reserves.
In his commentary, Nkala said the foreign currency auction system had worked well to address serious hurdles that confronted companies before June last year, when the platform was created by the Reserve Bank of Zimbabwe.
FBC’s inflation adjusted total income slowed to ZW$4,75 billion (about US$55 million) during the review period, from ZW$7,3 billion (about US$85 million) during the same period last year.
Profit after tax decreased to ZW$529 million (about US$6 million) during the review period, from ZW$3,3 billion (about US$38 million) in 2020.