THE International Monetary Fund (IMF), which last week painted a gloomy outlook for the economy warning a further decline this year, has challenged government to come up with “strong policies and reforms” for the country to achieve its growth potential, while pointing out the country’s five-year economic blue- print ZimAsset is not enough to rescue the situation.
In a staff appraisal released this week, following the first review under the Staff-Monitored Programme (SMP), the Bretton Woods institution said a host of changes, including respect for property rights, need to be made for the country’s growth potential to be realised.
“Zimbabwe is currently performing below its growth potential, requiring strong polices and reforms,” said the IMF.
“The timely and full implementation of ZimAsset could accelerate growth substantially. However, with limited financial resources and limited access to external capital flows, unleashing that potential will require swiftly addressing macroeconomic vulnerabilities, structural impediments—including the infrastructure gap, poor business climate, property rights and longstanding land-related issues.”
The IMF noted that the Zimbabwean government had identified improving the business climate as a priority to restoring investor confidence and competitiveness. To achieve this, government has amended the Indigenisation and Economic Empowerment Act to include new roles for line ministries to approve indigenisation plans, issue compliance certificates, and monitor implementation.
Government also committed itself to further clarifying the policy by publishing a simplified summary of the law on the Zimbabwe Investment Authority’s website, a move welcomed by IMF.
“The recent amendments to the indigenisation law go towards creating an environment that can attract foreign investment. Nevertheless, the authorities should make all possible efforts to inform potential investors of these changes, and reassure them that property rights will be fully respected,” said the IMF.
“In this sense, the authorities’ decision to summarise the laws’ content through a guide for investors to comply with the new requirements goes in the right direction by reducing the scope for discretion and uncertainty, which many investors have indicated as their main concern.”
Although the IMF urged Zimbabwe to introduce more reforms, the institution however, commended government for implementing its macroeconomic and structural reform programmes, despite economic and financial difficulties.
Zimbabwe has committed itself to reducing the primary fiscal deficit to raise its capacity to repay its debts, restoring confidence in the financial system, improving the business climate and garnering support for an arrears clearance strategy.
On restoring financial sustainability and advancing fiscal reforms, the IMF said the government had committed itself to bringing the primary fiscal deficit close to balance in 2015, while protecting priority social spending, and gradually reducing the stock of domestic arrears.
The IMF said Zimbabwe was also developing a medium-term strategy for public sector reforms to make savings on the wage bill.
In addition, government is working on a public financial management reform strategy aimed at improving budget preparation and execution, and strengthening expenditure control. The government is also working on amendments to the Public Finance Management Act to improve the public procurement framework, with the assistance of the World Bank.
IMF commended the government for moving towards restoring confidence and financial stability by initiating the recapitalisation of the Reserve Bank of Zimbabwe to enable it to carry out its core functions and to supervise the financial sector.