Economist Gift Mugano has warned that the Zimbabwean economy is rapidly approaching a crisis similar to the one experienced in 2008 when the country’s GDP growth plummeted to -17.7% and the Zimbabwean dollar became virtually worthless.
Reacting to the Mid-Term Budget Review Statement presented to parliament on Thursday by Finance, Economic Development and Investment Promotion Minister Mthuli Ncube, Mugano stated that the Treasury boss should consider introducing a supplementary budget to address the financial shortfall caused by the depreciation of the local currency.. Wrote Mugano on X:
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<h2>The mid-term budget review exposed economic rot</h2>
Forget about nice phrases from my esteemed brother [Mthuli Ncube] – consolidating stability…There is nothing to consolidate. The economy is in a dire situation. The economy going towards the graveyard. We are fast approaching 2008.
These are the facts:
1. Contribution of IMTT to total revenue fell drastically from about 16% in 2019 to 3.4% in 2024 – signifying deepening informality and collapse of the formal economy;
2. Percentage of people employed in the informal sector increased from 75.6% in 2019 to 87.7% in December 2023 – signifying deepening informality and the collapse of the formal economy. @MthuliNcube in the NDS1 was targeting to reduce informal employment to 70% (i.e., increasing formal employment to 30%) by 2025. Right now formal employment is sitting at 11.3%;
3. Youth unemployment is standing at 3.5 million – 3.5 million young people are unemployed. The majority of the youths are drug addicts.
4. National debt has ballooned to US$20.8 billion (ZiG287.2 billion/13.78) up from US$18.73 in 2023, i.e., a staggering US$2 billion increase;
5. Close to 50% of the population is living in extreme poverty.
6. Both the education and health sectors are in intensive care units.
7. Close to 25% of the children under 5 are suffering from stunting growth – future generation &amp; human capital is threatened;
8. Businesses executives tell me that they are failing to access forex from banks with some securing 5-10% of their forex requirement notwithstanding the assurances given by the @ReserveBankZIM
9. Exchange rates are running away – we hear banks are using rates averaging ZiG22.30/US$1 while parallel market rates are hovering around ZiG24/US$1.
10. Aggregate demand is plummeting – mari haisi kubatika or kutenderera – which is now a common statement in the market.
Until GOZ and all stakeholders in the ecosystem of policymaking confess the truth about the state of the economy, we will sleepwalk into 2008.
In view of the fact that the Honourable Minister of Finance didn’t table a supplementary budget, the following question is pertinent:
Official exchange shot from ZWL6000/US$1 (i.e. at the time you presented the 2024 budget in Nov 2023) to ZWL33,882 (now equivalent to ZiG13.52) as of 5 April 2024. Resultantly, the national budget which was equivalent to +US$9 billion when it was presented (under assumption of stable exchange rates) was eroded to US$1.68 billion. Isn’t this enough reason to do a supplementary budget?
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Pindula News

Zimbabwe's economy is in big trouble again, like in 2008. A famous economist named Gift Mugano said that the economy is getting worse. The government's budget is not enough, and many people are suffering. Lots of people are losing their jobs and living in poverty. The country's debt is growing, and children are not getting proper healthcare and education. The value of money is dropping, and businesses are struggling. Mugano warned that if things don't change, Zimbabwe could face a crisis like in 2008.

Zimbabwe's Economy Going Towards The Graveyard - Mugano

Zimbabwe has 2,5 tonnes of gold and US$300 million in cash reserves, positioning it favourably to introduce a new structured currency, authorities have claimed.
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu on Thursday said of the gold, 1,5 tonnes is held in the central bank’s vaults while one tonne is held offshore. He said:
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I can confirm that we have 1.1 tonnes of gold and other precious minerals in the form of diamonds which if converted to gold will be equal to 0.4 tonnes of gold making a total of 1.5 tonnes of what we are holding.
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Mushayavanhu said the 2,5 tonnes of gold reserves and other precious minerals are valued at US$175 million at Thursday’s price. He said:
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Over and above that, I have also confirmed the cash balances, and nostro balances held by the central bank, and I can confirm that there is US$100 million worth of foreign currency balances in cash.
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However, economic commentator Professor Gift Mugano said that the gold is not enough to support the structured currency even if the country is still going to receive forex inflows from exports, diaspora remittances, and credit, among other sources. Said Mugano:
<blockquote>
2.6 tons of gold &amp; US$100m (i.e., US$291.8m equivalent) are a drop in the ocean. Here is the simple mathematics:
If we combined 1.1 tons of gold (local) and 1.5 tons of gold (offshore), we have 2.6 tons of gold. If we use the price of gold per ounce of US$2294 as of yesterday, our 2.6 tonnes of gold gives us an estimated value of US$191.8m.
Our total reserves are estimated at US$ 291.8 million if we factor in the additional US$100 which has been announced by the RBZ.
This year, we are anticipating to import goods worth US$9 billion, that is, US$750m per month. Our reserves (2.6 tons + US$100m) = US$291.8m can only cover 11.7 days of the month if we are not exporting anything.
In short, our reserves are not enough to give us at least one month of import cover. Basic economic theory tells us that we must have at least six (6) months of import cover to guarantee currency stability if all things are equal. This is a priori requirement.
In our case, we have approx 1/3 month cover! This is not enough to support the structured currency even if we will still receive forex inflows from exports, diaspora remittances, credit, etc.
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Meanwhile, in response to questions from journalists, George Guvamatanga, the Permanent Secretary for Finance, Economic Development, and Investment Promotion, stated that the central bank’s indicated reserves were supplemented by US$300 million held in the Treasury.
The Treasury’s reserves amount to US$300 million in addition to what the central bank has already indicated. Said Guvamatanga (<a href="https://www.herald.co.zw/zim-holds-25t-gold-us300m-cash-reserves/">as quoted by The Herald</a>):
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The reserves that the Reserve Bank is talking about are central bank reserves; they exclude what His Excellency (the President) has also instructed us to put in reserve. As the fiscal authorities, you cannot run a Government without reserves.
So, over and above the reserves that are in the central bank, the instruction that came to the central bank was also given to Treasury.
And at least if you allow me, Your Excellency, just for today to mention that as Government of Zimbabwe, in various banks in Zimbabwe, not even in the central bank, and in private banks, we have got US$300 million over and above this US$275 million.
We have got more than one month’s import cover which we are holding between the Reserve Bank and the Government of Zimbabwe.
So, the total is more than enough for those who are asking to say, do we have adequate reserves? If you go to the private banks, they will show you that they are holding money on behalf of the Government, which is just over US$300 million, which is again a reserve that we were directed by His Excellency that you have to keep reserve.
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Mushayavanhu is anticipated to unveil the long-awaited 2024 Monetary Policy Statement today. This statement will introduce the new structured currency, aimed at addressing inflation and other persistent challenges that have impacted the stability of the local currency.
The eagerly awaited new currency is widely speculated to be gold-backed, signalling a potential shift toward greater economic resilience.
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