Zimbabwe’s new Finance minister must embrace the market and not to fight it, a World Bank official has said.
In a paper presented at the Sapes Trust summit recently, World Bank country manager for Zimbabwe Nginya Mungai Lenneiye said the country’s Finance minister would need to promote actions that encouraged domestic and foreign investments.
He would also need to strictly manage the fiscus as well as implement and support the economic programme agreed to with the International Monetary Fund.
The bank official made his pronouncements before the appointment on Tuesday of Patrick Chinamasa as Finance minister. He stressed that whoever was put in charge of Treasury needed to ensure government did not spend all its revenues on civil servants’ salaries.
Currently, civil servants’ salaries gobble up nearly US$2,6 billion annually, which is about 70% of government’s total revenue collections.
In all, the Zimbabwe government spends around 35% of GDP compared to 27% on average for Africa and 25% for Asia. More than half of that spend goes towards paying 230 000 civil servants. Zimbabwe therefore has the highest public service wages-to-GDP ratio in sub-Saharan Africa, after Lesotho.
The World Bank expected Zimbabwe’s revenues to remain largely within US$300 million a month and the annual GDP growth rate between 2013-15 to be 5%.
The bank remained concerned about the continued vulnerability of the local banking sector, strangled by persistent liquidity challenges.
A US$10 billion debt overhang and failure to attract investment remained huge challenges for the economy going forward.
Lenneiye recommended that Zimbabwe now privatises state-owned enterprises.
While Ziscosteel and Noczim seemed to be frontrunners for privatisation, the transactions were clouded by uncertainties, he said.
According to the World Bank official, government also needed to complete its land reform programme by providing records and setting up administration systems. It also needed to put up measures for handling conflicts (including compensations), ensure security of tenure and create a land market.
Government also had to harness remittances of funds by the diaspora, which amounted to US$401 billion last year, up 5,3% from the prior year. The World Bank sees remittances to developing countries between 2013 and 2015 growing 8,8% annually to peak at about US$515 billion in 2015.
Of this amount, US$28 billion to US$39 billion is expected to flow into sub Saharan Africa.
The bank projects that by 2015, remittances to developing countries will equal foreign direct investment and will be five times the level of Official Development Assistance.
This is because diaspora investors can be a more stable source of funds than other foreign investors owing to their familiarity with the home countries.