Business is not immune to economic challenges and geopolitical strife, even if the correlation between financial markets and growth in the economy is weak, FBC Chairman, Herbert Nkala says on the interim results for the Half Year Ended 30 June 2019.
The bank’s chairman says this in the background of stiff relations between Zimbabwe and western countries relating to issues concerning sanctions and human rights violations.
“”The present political and economic climate creates a wide range of challenges across many industries, which result in difficulties but also opportunities to the Group (FBC), Nkala says.
“Currency reforms, robust monetary policy interventions, and the continued international re-engagement efforts by the government are critical to the future performance of FBC Holdings and the economy at large.”
The FBC boss also says the operating environment remained challenging throughout the first half of 2019.
“During the period under review, inflationary pressure remained a cause for concern, and its effects have been felt across the economy as evidenced by the general increase in the cost of doing business,” Nkala went on.
“The annual inflation rate has been on an upward trajectory having closed the first half of 2019 at 175.7% from 42.1% at the beginning of the year.”
“The increase in prices of goods and services was largely being driven by the adverse movement in foreign exchange rates.”
The Chairman acknowledged that monetary policy measures implemented by the government during the half-year of 2019 have resulted in some significant developments in the sector.
“The liberalisation of the interbank foreign exchange trading has seen an upward movement in exchange rates and an increase in interbank trades as the gap between the formal interbank rate and the parallel market rate narrows,” Nkala says.
“This, coupled with the reintroduction of Bureau De Change has resulted in increased volumes of foreign currency traded on the formal market, which has contributed to improved availability of foreign currency on the formal market, albeit at a higher cost.”
“Interest rates have been on the increase in reaction to the negative returns arising from an increased inflation rate and the need to discourage rent seeking behaviour from speculative borrowing.”
Geo-politically, Zimbabwe is under economic sanctions with western countries accusing the African country of human rights violations.
Zimbabwe is working on a re-engagement process with Europe and the United States, with critics saying the progress is going slow.