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U.S. Aid freeze to deepen Zimbabwe’s economic woes, warns FBC Securities

31 Jan, 2025 - 13:01 0 Views
U.S. Aid freeze to deepen Zimbabwe’s economic woes, warns FBC Securities Hospital, Human Heart, Medical Exam, Pharmacy, Currency
Tapiwanashe Mangwiro
Zimbabwe’s fragile economy faces mounting pressure following the U.S. Government’s decision to suspend foreign aid for 90 days, warns FBC Securities, a registered stockbroker on the Zimbabwe Stock Exchange.
The aid freeze, announced under a new executive order, threatens to exacerbate liquidity constraints, inflationary risks and currency volatility in an already strained economic environment.
Historically, U.S. aid has been a critical pillar of Zimbabwe’s economic framework, supporting key sectors such as healthcare, food security and infrastructure.
“The United States has been the largest provider of health and humanitarian assistance, including PEPFAR, food aid and disaster relief,” FBC Securities noted.
Over the past three years, the U.S. has injected approximately US$1 billion into Zimbabwe’s economy, mainly through multilateral organisations and NGOs. With this funding halted, Zimbabwe faces an urgent need to reallocate its limited fiscal resources to sustain essential services.
One of the most immediate consequences of the aid freeze is the reduction in foreign currency liquidity.
“NGOs contributed 10 percent and 9 percent of total foreign currency receipts in January – September 2023 and 2024, respectively,” FBC Securities stated.
A decline in these inflows will not only curtail disposable income but also weaken consumer spending, particularly in rural and vulnerable communities. Additionally, reduced donor support could force banks to restrict foreign currency withdrawals, pushing more businesses and individuals toward the black market and worsening exchange rate instability.
The Zimbabwean dollar (ZiG), introduced in April 2024, has already faced depreciation pressures, losing 43 percent of its value amid exchange rate volatility and inflationary concerns. Although stability was restored post-devaluation, FBC Securities warns that the aid freeze may reignite currency fluctuations.
“With lower forex inflows from donor programmes, pressure on the ZiG will increase, leading to further depreciation and inflation,” the firm cautioned.
The stock market is also likely to feel the impact. FBC Securities predicts increased volatility on the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Exchange (VFEX) as investors seek safe-haven assets such as gold, real estate, and U.S. dollars.
“The freeze may reduce foreign currency inflows, lowering stock market liquidity and causing volatility in blue-chip stocks,” the report noted.
To mitigate the fallout, FBC Securities advises the Zimbabwean government to pursue alternative funding sources, strengthen domestic revenue mobilization, and accelerate debt resolution efforts with multilateral institutions.
“Now more than ever, bold and strategic reforms are needed to steer Zimbabwe toward financial stability and sustainable growth,” the firm concluded.
With economic uncertainty deepening, all eyes will be on Zimbabwe’s 2025 Monetary Policy Statement, which is expected to outline measures to balance inflation control and liquidity management.
However, as FBC Securities warns, without external financial support, Zimbabwe’s road to stability remains perilous.

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