Mthuli Ncube’s Four Graphs To Show “Zimbabwe’s Economy Is Improving”


Prof Mthuli Ncube, Zimbabwe’s Minister of Finance clearly believes in communicating and sharing ‘progress.’ Whether or not you believe what he calls progress is actually progress doesn’t matter, it is a good thing when those who hold public office have a sense of accountability enough to report back to the citizenry they serve.

The minister has shared four graphs that depict what he calls, “Zimbabwe Recent Economic Developments.” I am sharing the four graphs below together with the text that Ncube himself used to describe each graph including his emphasis (bold text). I then give my own personal comment to each of those graphs:

1.Government Spending

What the minister says about this

  • The central government deficit stabilized starting in September 2018, and turned into a surplus in the first 4 months of 2019

My comments

What Ncube’s graph shows above is that so far this year, the Zimbabwean government is living within its means. You would think this is the obvious thing for governments to do but they hardly ever do this. They spend more than they get and in Zimbabwe’s case this was more detrimental because there weren’t any (external) loans to cover the deficit.


This is highly unsustainable. Probably the best thing Mthuli Ncube has done is to shift the government from deficit budgeting to surplus. The last time the government spent within its means was during the inclusive government with Tendai Biti in Ncube’s chair. Of course this is not really about the government spending less but also getting more from all of us primarily through the 2% transaction tax Ncube introduced last October.

2.Government Domestic Debt

What the minister says about this

  • After increasing dramatically between 2015 and August 2018, Government domestic borrowing was brought under control and the stock of public domestic debt began to decline in early 2019

My comments

As I said above, the government of Zimbabwe was for many years spending beyond its means. This was without support of external loans which meant the government was borrowing from local banks including the Reserve Bank of Zimbabwe itself.

In simple terms, this is bad because the government then competes with productive industry for money. This limits the amount of money that actually goes towards production. More importantly, borrowing through the central bank is what led to you and I having money we deposited as USD becoming just useless numbers called RTGS. The banking sector gave real money to the government and was left holding on to a promise that the Zimbabwean government would pay them back. Our US dollars were forever gone!

Ncube’s graph above shows that the amount of money owed to banks by the government is starting to shrink. The change is still very small but the small change at least shows that the government is paying back more than it is borrowing afresh, in essence climbing out of the hole it had dug for itself. What’s not clear though is: what currency is the government using to pay back? When they borrowed some of that money it was definitely US dollars.

3.Money Supply

What the minister says about this

  • The monetary base has remained essentially unchanged since September 2018, in line with government’s efforts to target monetary aggregates. However, there remains a high level of liquidity in the system, which should be controlled through monetary operations (7-day savings bonds) and higher domestic interest rates. Excess liquidity is contributing to exchange rate depreciation

My comments

As the average Zimbabwean now knows, too much money in the market is not a good thing. Too much money chasing too few goods is called inflation and we observe it when prices increase. In lay terms: every time the government borrowed from the Reserve Bank of Zimbabwe, money was created out of thin air. In other countries when this happens, more notes are printed.

Zimbabwe was not using its own notes (RBZ couldn’t print) so the central bank essentially just invented numbers that they pushed into the accounts of whoever the government wanted to pay. This is why there was too little of the USD to satisfy everyone. Yes some of you had deposited real USD but there were others that were paid with imaginary money that was claiming to be USD too and the result was chaos.

The graph there shows that the total money in the market is not increasing as much as it was in the years prior due to some of what we discussed above. However, there is still too much money in the market which was accumulating all these years and this is still a problem.

Ncube wants to solve this by making it very expensive to borrow money while at the same time very rewarding to keep money in the bank. You will probably start seeing banks offering good interest to keep your money. This is a very simplified explanation but that’s the gist of it.

Bank Deposits

What the minister says about this

  • Bank deposits (a proxy for money supply) have continued to increase in 2019. However, this is due almost exclusively to valuation effects, as the $RTGS value of Nostro FCA accounts increased rapidly due to a sharp depreciation of the $RTGS. Domestic currency bank deposits have remained stable since September 2018, in line with fiscal and monetary restraint.

My comments

This graph is basically the same as the one before it except that right now its showing the amount of money in the market that’s held in bank accounts. You can see from October, the separation of accounts into RTGS and nostro. The amount that’s getting into the formal economy as real foreign currency is very low compared to money we are just recycling.

Make no mistake, the biggest culprit that has brought us here is an undisciplined government that did not live within its means. However, we are here, what do we do? Ncube’s measures make sense on paper. The biggest challenge he faces is that we have been bitten more than once and we are 100 times more shy.

Ncube’s efforts are all but doomed because there just isn’t any confidence in the market. Added to that, there is no solid plan to increase productivity and exports while decreasing imports. The demand for forex will thus remain too high compared to supply.

I wish I had a definite answer to whether the re-introduction of the Zim dollar is a good thing. The best answer I can offer is: it’s complicated. When a girlfriend or boyfriend changes their Facebook relationship status to “It’s complicated,” you kinda know what that means right? BUT it may just be different in your case right? That’s the best answer I can give…

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