Reforms key to Zim recovery: AfDB

THE African Development Bank (AfDB) has forecast 6% GDP growth for Zimbabwe in 2019, but says this will be largely dependent on the implementation of reformist economic policies.

By Melody Chikono

Government this year estimated that the economy would expand 6,3% against an initial projection of 4,5%, saying the economy was showing signs of recovery despite a number of challenges and risks.
To achieve such growth, the bank said there should be fiscal consolidation and macro-economic stability. This will be achieved through the implementation of the government’s Transitional Stabilisation Programme (TSP), the bank said.
Government last month launched the TSP in a bid to set the economy on a recovery path after years of stagnation. The programme will run from October 2018 to December 2020.
The TSP rides on the policy reform thrust of the new government to stimulate domestic production, exports, as well as transforming the economy to upper middle-income status by 2030.
AfDB country manager Damoni Kitabire told businessdigest on the sidelines of the launch of a Zimbabwe economic report and an updated infrastructure flagship report that the government needs to practice what it preaches to achieve economic growth.
“We are still hoping that the government will achieve its economic growth forecast supported by the stabilisation plan and the budget which we are all looking forward to and we are hoping government will do what it says it will do. We are still positive that the government will achieve the 5-6% growth region,” Kitabire said.
“All that is dependent on the right policies in place and top of the agenda is fiscal consolidation and macro-economic stability. Government must implement what it has proposed in the TSP and on top of the agenda should be fiscal consolidation and it’s very vital. For 2019 we hope Zimbabwe will also be able to achieve that 5-6% GDP growth but again it will be dependent on the right policy.”
At the launch of the report, Kitabire said government should redouble its economic reform efforts and ensure macroeconomic stability.
“We call for private investment policies and scaling up of fiscal consolidation and governance efforts,” he said.
Kitabire said Zimbabwe needs to urgently solve the financial and payment system, fiscal consolidation and policy predictability in a bid to attract investors as potential investors and bankers were wary of the situation.
“I think my take as someone who lives here and interacts with investors who come to our offices looking for potential financing, we are kind of overwhelmed by the basics of today. My colleagues may take a medium-term view but for those of us who live here and actually interact with bankers and investors that today the immediate is our problem.
“Things like the payment system are so urgent that if you are an investor and you are thinking of moving forward, you need a solution today. Policy predictability is so important and these are things we need to sort out now, even before we think about two to three months down the line,” he said.
“I won’t say much, the bankers are here. I am sure they have a perspective which also affects investment, and investment decisions. I also need to add fiscal consolidation that government has assured us. I think we are all waiting for the (budget) speech. These are the things we need fixed now and urgently. Once we do this, the country can move forward.”
Kitabire reiterated that the economy was in urgent need of reforms, adding that successful reforms would come through extensive stakeholder consultations.
The industry is saddled with a constrained payment system, liquidity constraints, inadequate foreign currency for industry to import raw materials and the continued influx of cheap imported products.
“Launching the reports is one step, but of great importance is our working together as stakeholders of this country. As the country moves forward in this long journey, we urge the government , which is a pivotal player in this long walk, to redouble its economic reform efforts and ensure macroeconomic stability. We call for pro-private investment policies and scaling up of fiscal consolidation and governance efforts,” he said.
In a report titled Building a New Zimbabwe, Targeted Policies for Growth and Job Creation, AfDB noted that Zimbabwe was among other African countries positioned to improve their investment climate and attract multinational companies from advanced economies.
“Zimbabwe’s factor endowment is well suited for production. Some elements of the supply chain are in place, comparative advantage indice or export specialisation indices indicate potential and labour skill requirements are low or easily transferable,” said the report.
The report underscored the need for promoting links across priority sectors through value chains and clusters, adding the Confederation of Zimbabwe Industries and Ministry of Industry and Trade have identified 18 value chains that will link the resource sectors with manufacturing through backward, forward and horizontal links.
The regional bank’s report noted that the government should provide more support by establishing agri-ecological zones and focus on rebuilding and strengthening the eight agricultural commodity sectors, namely horticulture, livestock, legumes, tree crops, grains, cotton, tobacco and timber.

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