AS ZIMBABWE battles to extricate itself from mounting economic woes that have forced Finance minister Patrick Chinamasa to revise his GDP growth forecast for 2015 from 3,2% to 1,5%, Reserve Bank of Zimbabwe (RBZ) is optimistic an economic transformation will dawn in 2016 on the back of positive gains in the ongoing implementation of the country’s debt and arrears clearance strategy.
Zimbabwe has been forced to revise downwards its economic growth targets in successive years due to underperformance of the real sector owing to structural deficiencies such as run-down infrastructure and discord within government over its foreign direct investment policy, seen as a bane to sustainable growth in the medium to long-term.
In an interview with the Zimbabwe Independent last week in the capital on the progress of the external debt arrears clearance strategy, Mangudya said the country was on course and well within its timelines to clear US$1,8 billion arrears owed to the international financial institutions.
“We are on target in the mobilisation of financial resources required to settle the external debt arrears,” Mangudya said, adding this is part of a number of confidence boosting initiatives that are expected to bear fruit soon.
The central bank chief said on the basis of what the country has achieved so far and “the sound economic policies” being put in place by government, he expected 2016 to be “a transformative year” for the Zimbabwean economy.
Mangudya allayed fears there will be crowding out of the private sector by government under the debt arrears clearance process, saying all funding was offshore.
“Crowding out implies we are taking money from the private sector, for instance local banks, but all these funds are coming from offshore,” Mangudya said.
He said clearance of arrears would improve the private sector including the financial sector’s access to offshore finance due to improvement in country risk.
“Country risk is made up sovereign risk, transfer risk and economic risk.
These risks which, are basically perceived risks in our case greatly influence decisions by investors,” he said.
The country has a debt overhang of US$10,8 billion accrued from both public and private sector. The public debt amounts to US$5,6 billion, split between multilateral financial institutions (US$2,2 billion), the Paris Club (US$2,7 billion) and US$700 million to the non-Paris Club.
Under the country’s repayment strategy Zimbabwe will secure US$819 million bridge finance from the African Export-Import Bank (Afreximbank) to repay arrears to the AfDB (US$585 million); African Development Fund of the AfDB (US$16 million) and US$218 million to International Development Association (IDA). The IDA is a World Bank fund for poor countries.