AFDB calls for liberalised exchange rate; Zim economy to grow 4.2% in F19

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NDAMU SANDU

The African Development Bank (AfDB) has said transparency in the mining sector and curbing corruption are opportunities requiring minimal additional investment to realise medium-term growth targets for Zimbabwe.

President Emmerson Mnangagwa is on a five nation tour to lure foreign direct investment under the Zimbabwe is open for business hymn.

But AfDB said there are low hanging fruits Zimbabwe can exploit on.

“In particular, measures are needed to increase transparency in the mining sector, strengthen property rights, reduce expropriation concerns, control corruption, and liberalise the foreign exchange markets,” the bank said in its Africa Economic Outlook 2019 report
released yesterday.

“Regeneration of civil society and a renewed engagement with political actors in a positive social contract will accelerate political reform. Given the vast natural resources, relatively good stock of public infrastructure, and comparatively skilled labor force, Zimbabwe has an
opportunity to join existing supply chains in Africa through the Continental Free Trade Area.”

The bank said Zimbabwe’s fiscal deficit was an estimated 10,7% of GDP in 2018, compared with 12,5% of GDP in 2017, financed mainly through domestic borrowing.

It said Zimbabwe’s total external debt was an estimated 45,3% of GDP in 2018, down from 53,8% in 2017. The current account deficit was an estimated 3,7% of GDP in 2018, with merchandise imports continuing to exceed exports, putting pressure on the supply of urgently needed foreign exchange and making it critical to diversify exports.

“The country’s protracted fiscal imbalances have constrained development expenditure and social service provision, undermining poverty reduction efforts. Unemployment pressures have been mounting as employment opportunities continue to dwindle,” AfDB said.

“Policy-related macroeconomic instability; lack of funding, land tenure, and investment regulations; high input costs and outdated machinery; inefficient government bureaucracy; and inadequate infrastructure (particularly energy) remain key challenges for private
sector development.”

Despite the headwinds, the economy is projected to grow by 4,2% in 2019 and 4,4% in 2020, the bank said.

AfDB said the high and unsustainable debt-to-GDP ratio, high fiscal deficit, cash shortages, three-tier pricing and limited availability of foreign exchange which continue to constrict economic activity and the persistent shortage of essential goods, including fuel and
consumer goods, remained the major headwinds for any meaningful economic recovery.

“The agricultural sector and mining are expected to be the main drivers of growth, backed by increased public and private investment,” it said.