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Sikhulekelani Moyo, [email protected] 

ZIMBABWE Stock Exchange-listed stockbroker FBC Securities Private Limited has urged the Government to take decisive action following the US foreign aid freeze, warning that the move could destabilise critical sectors, worsen exchange rate volatility, and accelerate inflationary pressures. 

This comes after US President Donald Trump announced his country’s withdrawal from the World Health Organisation (WHO), a decision that global health experts say will undermine international public health efforts and make it harder to combat future pandemics.

President Trump signed an executive order banning new US foreign aid spending, which was followed by a “stop-work order” on January 24, freezing funding to Pepfar (President’s Emergency Plan for AIDS Relief). This move threatens to disrupt antiretroviral drug (ARV) supplies, as well as resources for HIV, tuberculosis (TB), and malaria programmes in Zimbabwe.

United States President, Donald Trump

In a statement titled “US Foreign Aid Halt: Impact on Zimbabwe’s Economy,” FBC Securities Pvt Ltd warned that the aid freeze exacerbates liquidity constraints, foreign currency shortages and inflationary pressures. 

Foreign aid has historically been a crucial pillar of Zimbabwe’s economic framework, supporting healthcare, food security, infrastructure and social programmes. With reduced donor inflows, the banking sector, stock markets and formal businesses will struggle to maintain stability. 

“To mitigate these challenges, the Zimbabwean Government must take decisive action by strengthening domestic revenue mobilisation, restoring investor confidence, restructuring state-owned enterprises (SOEs) and improving governance and fiscal discipline,” reads the FBC statement.

“Pursuing debt resolution efforts with multilateral institutions, diversifying export earnings and fostering a stable macroeconomic environment will be crucial for weathering the impact of declining external support and ensuring long-term economic resilience.”

FBC Securities said bold and strategic reforms are needed to steer the country toward financial stability and sustainable growth. The Government has acknowledged the potential impact of the US withdrawal from WHO on the health sector and has pledged to intensify domestic resource mobilisation efforts to close the gap. 

Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube has indicated that revenue from the sugar tax and the newly introduced fast food tax will be ring-fenced to support the health sector.

FBC Securities also suggested that Zimbabwe could seek alternative funding from other international donors, regional partners and non-traditional allies. 

They said engaging with organisations such as the African Union, Southern African Development Community (SADC) and friends in the global south could open new avenues for financial and technical assistance.

The organisation said donor-funded projects and direct humanitarian assistance contribute to local foreign currency liquidity circulation, with NGOs and humanitarian organisations distributing US dollar payments to local suppliers, employees and contractors. 

“NGOs, for example, contributed 10 percent and nine percent of total foreign currency receipts into Zimbabwe in January to September 2023 and January to September 2024 respectively,” said FBC Securities.

The organisation noted that the reduction in these cash inflows will result in less disposable income, affecting consumer spending, particularly in rural and vulnerable communities. 

“The freeze will also exacerbate foreign currency shortages in the economy, making it harder to finance imports and working capital requirements of private sector businesses,” said FBC Securities.

According to FBC Securities, some of the impacts include reduced deposits in FCAs, reduced foreign currency inflows, lowering stock market liquidity and causing volatility in blue-chip stocks. — @SikhulekelaniM1.