Ncube told a media briefing from Davos on Wednesday that he was concerned that higher interest rates and a stronger US dollar emanating from Trump’s inward looking policies will hurt emerging market economies and currencies. Picture: X/@MthuliNcube
Zimbabwean Finance Minister, Mthuli Ncube, is concerned that inward looking policies under newly inaugurated US President Donald Trump could result in higher inflation, elevated interest rates, and a stronger greenback, which could hurt emerging market currencies and capital flight as investors chase treasury bills.
Trump is adopting policies that prioritise the United States’ interests. He has already signed Executive Orders withdrawing the US from the World Health Organisation (WHO) and limiting foreign aid, among others.
Emerging market finance ministers meeting in Davos for the 2025 World Economic Forum (WEF) Annual Meetings are concerned that this could have implications for their economies and funding flows for critical sectors such as healthcare.
Ncube told a media briefing from Davos on Wednesday that he was concerned that higher interest rates and a stronger US dollar emanating from Trump’s inward looking policies will hurt emerging market economies and currencies.
“Higher interest rates this will keep the USD stronger and we will not be comfortable if USD is too stronger. A strong USD may encourage imports too much which encourages current account deficits for countries like Zimbabwe,” he said.
For emerging markets, explained Ncube, a “stronger US dollar will suck liquidity away and hurt emerging market currencies and capital will exit” from these economies in search of treasury bills.
The United States’ withdrawal from the WHO will likely result in limited funding flows for healthcare programs under the UN agency.
Ncube said Zimbabwe and other emerging markets now have to mobilise resources domestically to plug any funding gaps for healthcare.
Zimbabwe has implemented various taxes such as a sugar tax, levies on fast foods and on airtime top-ups in addition to an AIDS levy among others.
Resources from these statutory collections, said Ncube, would help the government to marshal domestic resources to fund health sector programs and importation of equipment used in cancer treatment.
“We discussed what Trump means for global trade and international relations especially for Africa. One issue we noted was the US pulling out of the WHO - we felt that this perhaps signals reduced support on health front for countries such as Zimbabwe which relies on PEPFAR funding for HIV programs,” said Ncube.
The withdrawal by US from the WHO means that Zimbabwe has to “scale up our funding for health through taxes such as sugar taxes, and fast foods and sin taxes among others to fill the gap in any funding” previously received.
Zimbabwe has however been battling a shrinking tax and revenue base due to economic difficulties that have resulted in the closure of companies and flight by international investors.
Companies such as Standard Chartered have recently divested from Zimbabwe while audit and accountancy firms have also been divesting, passing on operations to local management under new brands.
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