THE International Monetary Fund (IMF) and other key economic stakeholders have urged President Robert Mugabe’s new-look Cabinet to quickly deal with the economy, which is now threatened with the return of hyperinflation.
BY TATIRA ZWINOIRA
Last week, Mugabe reshuffled his cabinet, moving ministers into and out of several key ministerial posts.
The biggest surprise was the apparent demotion of Finance minister Patrick Chinamasa to the newly-created Cyber Security, Threat Detection and Mitigation portfolio.
He was replaced at Finance with another surprise — former Home Affairs minister Ignatius Chombo.
Chinamasa’s demotion was on the back of his relative success in mending Zimbabwe’s relations with multilateral financial institutions such as the IMF and World Bank Group.
IMF country representative Christian Beddies told Standardbusiness the global lender was focused on assisting Zimbabwe with policy advice and capacity development.
“We are encouraging Zimbabwe to press ahead with economic adjustment and reforms in a timely manner, so that the country can realise its potential,” he said.
“We will continue to work with our counterparts in government, assisting Zimbabwe with policy advice and capacity development.
“The authorities cleared Zimbabwe’s arrears with the IMF and we understand they are working on ways to clear arrears with the World Bank and the African Development Bank.”
Zimbabwe is facing a biting foreign currency shortage. The crisis-torn country has failed to live within its means, incurring a budget deficit of $1,4 billion in 2016, which was financed by borrowing from the domestic market through the issuance of treasury bills — crowding out the private sector in the process.
There is also a growing bubble in terms of real time gross settlement (RTGS) balances, which needs to be backed by at least 40 or 50% of real cash , but are instead backed by less than 25%.
Confederation of Zimbabwe Retailers president Denford Mutashu said urgent attention needed to be given to policies going forward.
“The issue of foreign currency shortages leading to price distortions and market indiscipline that has resulted in multi-tier pricing cannot be over-emphasised.
“The country requires a sustainable foreign currency generation strategy,” he said.
“Industry needs support to boost production of locally-manufactured goods.
“The ease and cost of doing business has continued to make local goods uncompetitive in the external markets.”
Mutashu said what was required was harmony within the institution of government with consistent policies that spoke to each other.
Policy discord, corruption and bureaucracy killed momentum, he said.
Zimbabwe cannot borrow from multilateral financial institutions as it has failed to clear outstanding obligations.
Zimbabwe owes the African Development Bank ($642 million), World Bank ($1,4 billion) and $294 million to the European Investment Bank.
A World Bank spokesman said the institution was committed to supporting Zimbabwe achieve its development goals but said the country would regain access to relevant financing instruments “upon arrears clearance”.
Ashok Chakravarti, an economist and consultant in the Office of the President and Cabinet, said at the end of the day the new ministers had to address the challenges besetting the economy.
“There is no avoiding the fundamental issues relating to the budget deficit and government, expenditure which the minister of Finance will have to deal with and there are a lot of options there that have been spoken about, which I think they should take seriously,” he said.
“For instance, parastatal reforms are a major source of expenditure and is something that we need to deal with.”
Zimbabwe has 107 state-owned enterprises, with 43 wholly commercial entities.
Parastatals represent about 14% of gross domestic product, with commercial state-owned enterprises contributing 7,5%.
A number of parastatals and state-owned enterprises are bankrupt due to years of mismanagement, corruption, cronyism and political meddling.
Chakravarti said government had to deal with the indigenisation legislation, widely seen as an impediment to foreign direct investment.
“There has been a lot of talk but we have not seen movement in terms of the amendment of the act of the regulation which we need to see,” he said.
“I can just hope the new team will take out these issues in earnest and put the amendments in place because those are impediments to foreign investment that everybody has accepted now.”
The Indigenisation and Empowerment Act dictates that at least 51% shareholding of all businesses with a net asset value of $500 000 or more should be in the hands of locals.
Mugabe last year announced exemptions of the act on certain parts of the economy which are yet to be put into law.
Former deputy minister of Industry and Commerce, Charity Mabuwa was appointed to head the Youth Development, Indigenisation and Empowerment ministry.
Mabuwa replaced Patrick Zhuwao who was reassigned to the Public Service, Labour and Social Welfare portfolio.
Confederation of Zimbabwe Industries president Sifelani Jabangwe said he hoped Chombo would continue assisting manufacturers in the allocation of foreign currency.
Jabangwe said Mabuwa’s experience in the Industry and Commerce ministry would help her get the Indigenisation Act clarifications into law for the sector to attract the much-needed investment.
“We expect that these officials will work well for the economy. Yes, we would have liked that they be continuity in the ministry of let’s say Finance but we believe that the long-term project that government and the former minister of Finance were implementing was in line with government [policies],” Jabangwe said.
“There needs to be understanding of what we need to do, particularly in regard to industry because the issue of pro-production is coming from all quarters, not just the ministry of industry; so we believe that the agenda of promoting the resuscitation of industry should continue.”
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said there was no time for acclimatisation in the new roles for the reshuffled ministers.
“We do not think a minister will change the policy direction we have at the moment because once a minister changes policy direction, we will be working without a plan. A plan transcends beyond an individual or personality,” he said.
“There is nothing unusual about having a new minister of Finance; what is important is to get him to understand the issues such as the fiscus first, in terms of government spending, deficit and the cash crisis.”
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