ZSE mirrors a dead economy

THE Zimbabwe Stock Exchange (ZSE) — a barometer of the performance of the economy — turnover on Tuesday plunged to a meagre US$105 from as high as US$1,6 million recorded at the close of trading last Friday, its lowest in seven years mirroring serious economic deterioration.

Zimbabwe Independent Comment

The market remained unchanged on Tuesday from the previous day, closing at total a market capitalisation of US$2,9 billion. There were no price movements recorded during trade. Total value traded fell 99,26% to US$104,93. Monday’s trading figures dropped 99,13% to US$14 200. On Wednesday total value traded rose 148 060,13% to US$155 480. Last Friday’s trading value was up 5,15% to US$1,63 million, showing that this week’s performance was dismal.

Yesterday the bourse recovered marginally to close at a market capitalisation of US$2,7 billion. This trend was in line with the recent ZSE bearish performances. The market remained bearish in June as it fell 3,51% to close the month at a total market capitalisation of US$2,9 billion. The paltry US$104,93 value traded on Tuesday just indicates how bad the economic situation is.

Zimbabwe’s economic problems are getting worse. Apart from the structural issues which have remained unaddressed for a long time, company closures, job losses, the liquidity crunch and cash shortages are the clearest manifestations of the deepening crisis.

Growth was merely 1,1% last year and this year things won’t get any better. In fact, they will get worse.
Although Zimbabwe has met all quantitative targets and structural benchmarks under the third and final review of the IMF’s Staff-Monitored Programme, a broader reform agenda presented in Lima, Peru, in October last year on the arrears clearance strategy is now under threat from government’s renewed repressive politics and policy zigzags.

In the aftermath of recent anti-government demonstrations and war veterans’ protests, President Robert Mugabe on Wednesday threatened a fresh reign of terror. His regime arrested war veterans’ leaders and sent chilling warnings to civil society leaders, threatening to trample on democratic rights especially freedom of expression.

Britain says it would not support Zimbabwe’s new funding bid if it renews repression. Zimbabwe wants to clear its US$1,8 billion arrears to secure new funding. The objective is to unlock new finance to deal with adverse shocks and fund social and capital outlays.

The clearance of Zimbabwe’s external arrears will be an important step toward normalising relations with the international financial community. It will allow the country to eventually seek a new financial arrangement.

Besides, it will also send strong signals to the international community that the country is willing to reform, reduce the perceived country risk premium, and unlock affordable financing for government and the private sector.

This, together with policy reform and shift, will help sustained economic recovery and growth.

On its own this will, however, not be sufficient. Political and economic reforms are critical. Improving the business environment is key. In particular, repealing the indigenisation policy will be important. This will go a long way to propel Zimbabwe’s recovery.

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