News / National
Fixing Zimbabwe doable but ‘very hard', experts say
27 Sep 2018 at 14:05hrs | Views
THE job to rebuild Zimbabwe's broken economy is achievable, although it will take time and sacrifice from all stakeholders, analysts and Reserve Bank of Zimbabwe governor John Mangudya say.
This comes as President Emmerson Mnangagwa has also repeatedly stated — including in America this week where he was attending the United Nations General Assembly — that the country's economic turnaround will not be an overnight event.
The statements also come as there is renewed optimism in the country following former president Robert Mugabe's ouster from power, recent installation of a leaner Cabinet and current shake-up of the State bureaucracy.
Ashok Chakravarti, a University of Zimbabwe economics professor, told The Financial Gazette yesterday that resuscitating the country's sickly economy would take time and would not be a stroll in the park.
"After 37 years of economic mismanagement, it will take time. One month will certainly not be enough to correct all the wrongs," he said.
Chakravarti added that there were numerous possible solutions to the country's economic challenges, including the foreign currency crisis.
But to begin to mitigate these challenges, the government would have to start implementing the required remedies now.
In interviews in New York this week, Mangudya also warned that although fixing the country's economy, including the forex crisis, was doable, Zimbabweans should not expect a quick turnaround of the situation. "The meetings (with investors and financiers) have been very productive. But as you know in finance, it is not an overnight issue," he said.
"We need patient capital to restart our industries. We need patient capital to increase capacity utilisation in the country," Mangudya said.
"You do not start with execution. You start by negotiating and talking and then at the end of the day we have term sheets that will come our way and then we will be able to continue discussing and then execute later."
Mangudya later told The Financial Gazette that "government needs to work on rebalancing or right-sizing the economy by reducing fiscal imbalances, improving access to foreign finance and increasing confidence".
"Jumpstarting the economy requires substantial inflow of foreign exchange into the economy to support the productive sector, whilst at the same time minimising consumptive expenditure," he said.
Respect Gwenzi, the lead economist at research firm Equity Axis, said it would take "years" to realise meaningful recovery of the local economy.
"Fiscal consolidation is imperative and this will take at least two to three years. It has to be gradual," he said.
In any case, Gwenzi added, "any serious investor will have to do an assessment of the economy and its potential first before committing their capital here".
"A quick resolution to the outstanding multilateral debt has to be established to allow fresh credit lines. But without much fiscal space and with a lot of other economic excesses such as forex and cash shortages, we may not clear the debt soon," he said.
"Clearly the government is targeting a middle-income economy status by 2030, which implies a growth rate of at least 11 percent per annum over a 12-year period. But under the present circumstances, this is not achievable," he said further.
Tony Hawkins, an economics professor, also warned recently that reviving the economy — which would probably entail the government adopting an International Monetary Fund (IMF)-sponsored reform programme — would be accompanied by "pain" which was likely to be far worse than that experienced during the Economic Structural Adjustment Programme (ESAP) of 1991.
"The programme, which must tackle five unsustainable aspects which include currency devaluation, fiscal and public sector retrenchment, removal of subsidies and the abolition of protectionist policies such as SI 64, will have far-reaching implications for all businesses," he said.
Hawkins also said Zimbabwe's economic revival would need to start with the clearing of $2 billion in arrears to multilateral funders and getting the programme through the IMF board … "some of whose members will be constrained from voting in favour of Zimbabwe due to the Zimbabwe Democracy and Economic Recovery Act, which directed that the US government should oppose the granting of any loan or financial assistance to Zimbabwe".
"It will be a lengthy process … Zimbabwe will negotiate a debt-restructuring deal with official lenders (donors) at the Paris Club and even if all goes well, this process will take months … so, there is unlikely to be any inflow of official creditor financing before mid-2019," he added.
Another economist John Robertson also warned that selective application of laws and policies would also prolong the country's recovery process.
"Selective approach to laws does not inspire confidence. Current government employees should not have immunity," he said.
On his part, Busisa Moyo — United Refineries' chief executive — was of the view that parastatal reforms were going to be tough, while the currency crisis also needed urgent attention.
"Government will have to cut expenditures to reduce the budget deficit. Export generation and import management strategies are also key to manage the trade deficit," he said.
Finance minister Mthuli Ncube, who was also in New York with Mnangagwa, acknowledged that the revival of the country's economy would be painful, and that what Zimbabwe needed to do urgently was to curb fiscal indiscipline.
He revealed that the government was working on a plan to reduce its expenditure from around 33 percent of GDP to single digits over the coming three years.
"We have to reduce the public sector wage bill and deal with subsidies, but we also have to expand the tax base, increase tax collection efficiencies and ensure compliance with laws," Ncube said, adding that "there is no reform without pain … we are determined to fix this economy within five years".
This comes as President Emmerson Mnangagwa has also repeatedly stated — including in America this week where he was attending the United Nations General Assembly — that the country's economic turnaround will not be an overnight event.
The statements also come as there is renewed optimism in the country following former president Robert Mugabe's ouster from power, recent installation of a leaner Cabinet and current shake-up of the State bureaucracy.
Ashok Chakravarti, a University of Zimbabwe economics professor, told The Financial Gazette yesterday that resuscitating the country's sickly economy would take time and would not be a stroll in the park.
"After 37 years of economic mismanagement, it will take time. One month will certainly not be enough to correct all the wrongs," he said.
Chakravarti added that there were numerous possible solutions to the country's economic challenges, including the foreign currency crisis.
But to begin to mitigate these challenges, the government would have to start implementing the required remedies now.
In interviews in New York this week, Mangudya also warned that although fixing the country's economy, including the forex crisis, was doable, Zimbabweans should not expect a quick turnaround of the situation. "The meetings (with investors and financiers) have been very productive. But as you know in finance, it is not an overnight issue," he said.
"We need patient capital to restart our industries. We need patient capital to increase capacity utilisation in the country," Mangudya said.
"You do not start with execution. You start by negotiating and talking and then at the end of the day we have term sheets that will come our way and then we will be able to continue discussing and then execute later."
Mangudya later told The Financial Gazette that "government needs to work on rebalancing or right-sizing the economy by reducing fiscal imbalances, improving access to foreign finance and increasing confidence".
"Jumpstarting the economy requires substantial inflow of foreign exchange into the economy to support the productive sector, whilst at the same time minimising consumptive expenditure," he said.
Respect Gwenzi, the lead economist at research firm Equity Axis, said it would take "years" to realise meaningful recovery of the local economy.
"Fiscal consolidation is imperative and this will take at least two to three years. It has to be gradual," he said.
"A quick resolution to the outstanding multilateral debt has to be established to allow fresh credit lines. But without much fiscal space and with a lot of other economic excesses such as forex and cash shortages, we may not clear the debt soon," he said.
"Clearly the government is targeting a middle-income economy status by 2030, which implies a growth rate of at least 11 percent per annum over a 12-year period. But under the present circumstances, this is not achievable," he said further.
Tony Hawkins, an economics professor, also warned recently that reviving the economy — which would probably entail the government adopting an International Monetary Fund (IMF)-sponsored reform programme — would be accompanied by "pain" which was likely to be far worse than that experienced during the Economic Structural Adjustment Programme (ESAP) of 1991.
"The programme, which must tackle five unsustainable aspects which include currency devaluation, fiscal and public sector retrenchment, removal of subsidies and the abolition of protectionist policies such as SI 64, will have far-reaching implications for all businesses," he said.
Hawkins also said Zimbabwe's economic revival would need to start with the clearing of $2 billion in arrears to multilateral funders and getting the programme through the IMF board … "some of whose members will be constrained from voting in favour of Zimbabwe due to the Zimbabwe Democracy and Economic Recovery Act, which directed that the US government should oppose the granting of any loan or financial assistance to Zimbabwe".
"It will be a lengthy process … Zimbabwe will negotiate a debt-restructuring deal with official lenders (donors) at the Paris Club and even if all goes well, this process will take months … so, there is unlikely to be any inflow of official creditor financing before mid-2019," he added.
Another economist John Robertson also warned that selective application of laws and policies would also prolong the country's recovery process.
"Selective approach to laws does not inspire confidence. Current government employees should not have immunity," he said.
On his part, Busisa Moyo — United Refineries' chief executive — was of the view that parastatal reforms were going to be tough, while the currency crisis also needed urgent attention.
"Government will have to cut expenditures to reduce the budget deficit. Export generation and import management strategies are also key to manage the trade deficit," he said.
Finance minister Mthuli Ncube, who was also in New York with Mnangagwa, acknowledged that the revival of the country's economy would be painful, and that what Zimbabwe needed to do urgently was to curb fiscal indiscipline.
He revealed that the government was working on a plan to reduce its expenditure from around 33 percent of GDP to single digits over the coming three years.
"We have to reduce the public sector wage bill and deal with subsidies, but we also have to expand the tax base, increase tax collection efficiencies and ensure compliance with laws," Ncube said, adding that "there is no reform without pain … we are determined to fix this economy within five years".
Source - fingaz
