Zimbabwe’s elections, slated for end of next month, could help spur an accelerated economic growth in the next two years, a World Bank report said.
Chris Muronzi/Fidelity Mhlanga
In an interim strategy note for FY13-15, the WB sees the economy growing 6% this year.
“For 2013-15, baseline projections are that the economy will grow at 6% in 2013, 5% in 2014 and 15% in 2015, as investment may continue to remain below potential,” the bank says.
“Given anticipated elections and the new constitution, it is possible that in the next 12 to 24 months the post-2009 economic rebound could be accelerated and progress made in rebuilding the state.”
The bank also says the decision to proceed with arrears clearance operation would require Zimbabwe to consent to, and launch a medium–term growth-oriented reform programme it endorsed, generate satisfactory economic performance, undertake a stabilisation programme approved by the IMF and agree to a financing plan that fully clears arrears to the bank and ensures that debt service will be sustainable.
However, the bank warns that even after arrears are cleared, Zimbabwe would still face a substantial debt service to the bank.
Zimbabwe’s total external debt is US$10,7 billion, a figure representing 113% of its GDP.
The World Bank was owed US$976,45 million as at January 13 2013.
“Arrears to the bank would need to be cleared within a coordinated general effort to clear arrears to other creditors. Clearing arrears to multilateral institutions, or having a plan to do so, is a condition for reaching the Highly Indebted Poor Country (HIPC) decision point,” the report says.
“Just as the IMF will ask Zimbabwe to demonstrate a track record of payments to it, during the ISN period Zimbabwe would need to establish a track record of payments to the World Bank, in line with principle of pari passu treatment with other creditors. Given the amount of arrears to International Bank of Reconstruction and Development (IBRD) and International Development Association (IDA) (US$977,45 million), quarterly payments of payment capacity improves.”
The bank notes the introduction of cash management budget has imposed discipline in spending, and in both 2010 and 2011, small cash surpluses were generated.
It says Zimbabwe’s economic recovery depended on having an environment conducive to private sector activity.
The bank adds, Zimbabwe in the short-term needed to resolve uncertainties created by its empowerment and indigenisation laws.
The country’s indigenisation laws which compel foreigners to dispose of controlling stakes in their businesses to indginous Zimbabweans.
Zimbabwe was recently ranked 172 out of 185 countries in
the doing business rankings, down from 170 last year out of 183 countries.
While the enterprise survey for Zimbabwe captures the experiences of businesses currently in the country, the bank felt the outlook was encouraging,
helped by several indicators that performed above regional average.
The bank also notes the need to deepen international trade amid indications the country’s exports were more resource intensive than labour-intensive.
“Future growth prospects would substantially improve with a strategy of openness and overcoming structural constraints to export diversification and sustained growth, by improving Zimbabwe’s trade facilitation agenda, reducing nontariff barriers, improving the business environment supportive institutions, and opening up access to and reducing the cost of trade finance,” the report adds.
The bank also says it would support government efforts to improve the business climate and prospects for employment creation.
The bank says it would use analytical and advisory activities designed to identify ways to reduce barriers to investment, strengthen economic management, ease infrastructure bottlenecks and make agriculture more productive.
According to the report, priority would be given to areas that can facilitate quick wins such as improving liquidity and enhancing public sector management in the next budget cycle.
“It would provide on time advice on strengthening and rebuilding the public investment management system. Building on the framework laid out in the Medium Term Plan the bank would respond if the government requests assistance in drafting an interim poverty reduction strategy by analysing updated poverty data and sharing the experience with other countries,” read part of the report.
The report notes this was in line with World Development Report 2013 on jobs showing the strong correlation between private sector led growth and job creation in order to reduce poverty.
The report was drafted in consultation with government partners, the private sector and civil society, to ensure the bank’s readiness for eventual re- engagement.
The bank proposes to use the Multi Donor Trust Fund, bank budget and other resources to increase credit to the private sector and improve job creation and increase country competiveness and better investment allocations.
The bank says it intend to foster private sector growth through the improvement of the business environment, especially financial markets, infrastructure development, especially water and sanitation, and energy, as well as support support a comprehensive agrarian reform programme.
Zimbabwe has established macro-economic stability but has challenges in the business environment, rebuilding human capital, reestablishing the rule of law and implementing cluster-based development strategy to stimulate private sector development.