‘Exports only way out for Zim’

Source: ‘Exports only way out for Zim’ – The Zimbabwe Independent June 30, 2017

Zimbabwe is currently struggling to raise US$1,2 billion to settle World Bank arrears, a key hurdle in re-engaging with international financial institutions. Zimbabwe Independent projects editor Bernard Mpofu (BM) speaks to outgoing World Bank country manager Camille Nuamah (CM, pictured) on her three-year tour of duty. In this interview she speaks on the country’s arrears clearance programme, trade and reforms that are required to turnaround the economy. Below are excerpts of the interview:

BM: What is the latest on the arrears clearance programme?

CN: We don’t make bigger statements outside what is on the web, but as the minister (of Finance) said, it’s a slow process. The ball is in the government’s court and they are doing all of their various activities they need to do before they return to us and give a sense of the timetable.

BM: The World Bank’s latest Economic Update on Zimbabwe says the country should avoid non-concessionary funding to clear its arrears. Would you want to elaborate more on that?

CN: We have shared with the government some cautions that we have. So like any simple debt-financing transaction, you have to pay attention to those facilities you are going to use to clear those arrears because the ultimate goal of this is not to clear arrears.

The ultimate goal of this is to achieve debt sustainability for Zimbabwe and access (to capital) so that the country can sustainably access — like many developing countries — need a flow of financial resources that can smooth the fact that income is low today and you hope it’s going to be high in the future. So the future schedule — because also the minute you become current on your debt you still have to continue to be current.

So the interplay between the financing and the future ability to pay is something that we have encouraged government to pay very close attention to. And that may be in part some of the delays they are trying to work out. It comes back to your earlier question about what you project about growth. Are you conservative or are you a little bit more optimistic? So we are a little bit conservative in part because we still see structural issues. You may get a boost this year, but the impact of the liquidity crisis or the liquidity shortages on the other sectors of the economy, I don’t think it’s fully played out.

So we may have a different sense of when those liquidity shortages will get relieved. The services and industrial sectors are really hurting a lot. Agriculture may be recovering, but there are parts of the agriculture sector that require liquidity.

BM: There have been reports that government is negotiating with financiers that may help pay these arrears and we understand that this may cost an arm and a leg. As the World Bank, do you accept funds from these so-called vulture funds?

CM: As an institution, it’s very important that the arrears are cleared because it does speak to what the minister said about “lack of access”. However, we are not a short-term institution.

We are a medium to long-term development institution. The ultimate goal for this is debt sustainability so in any discussion that we have with the government that is what we stress. With the long-term debt sustainability, you don’t want a one-shot moment.

BM: This arrears clearance programme is being seen as slow. Can you elaborate on that?

CM: Everything takes a little bit longer and I don’t have any timelines. I think the government needs to take some time as I mentioned to consider and to put its right plan together and I know they are working on it.

BM: Do you see bond notes stimulating exports as government envisages?

CN: Well, we agree that they are a good measure for the liquidity issue, but they have to be managed extremely well so that you don’t push inflation like any money supply. But in addition, I think that the incentive for the export may be coming somewhat from the bond notes, but it’s coming from a much broader issue that started at stabilisation, that Zimbabwe is now an open-facing economy to the global world. The incentive to export has risen to the fore naturally because that is what is going to happen. It is always about that competitiveness. We see the impact coming on exports, but it’s not all just from the bond notes.

The other thing is that using a monetary instrument to try to do a trade policy has some shortcomings because clearly some of the exporters need to import so you have to look at the net impact on the types of exports that you have.

What we do see is the silver lining on the dark cloud is that the private sector has really gotten the message that the minister said exporting is our only way out.

BM: We have observed that the introduction of bond notes has resulted in a three-tier pricing system. As the World Bank, have you had any discussions with government over this matter?

CM: We have a discussion and there is actually a quote in the report which actually says that “in many economies you try to resolve these issues with administrative measures, but they may always be circumvented by a parallel market”.

That is not something anybody can control. That is the beauty of the market. We have raised to them that they need to monitor this carefully. I am not of the view that you can completely eliminate it with administrative measures. This economy needs confidence building.

BM: Early this month, the World Bank projected that the commodity market would be bullish. Do you still see this happening given current developments?

CN: There is an enormous volatility in the global political as well as economic environment right now. For me standing here in Zimbabwe, (it) will be hard to pin that down. I can only give you what the technical experts at the World Bank predicted recently.

The world has become much more volatile in the last few months.

BM: One issue the World Bank and the IMF have been talking about has been improving the ease of doing business.

Despite all this talk, Zimbabwe has slid on the Ease of Doing Business index. Are we going to improve this year?

CN: I don’t want raise too many expectations. I do think they are making a lot of progress. I think that everyone under-estimated the vigour of the institutionality of the parliamentary process.

I think the Office of the President has worked with parliament to see through this process and they got some of them (reforms) through. But I think it’s not just about laws but I think it’s about those institutions that are governed by those laws changing their systems.

BM: What have been the highlights of your tour of duty?

CN: I really enjoyed my stay here. I have worked outside the Africa region for the greater part of 15 years and Zimbabwe was my first foray back to Africa and you can tell how much I have enjoyed, but I also feel much more impact here because I’m not leaving the region. I am going to Nairobi.

The thing I would like to see better is communication and so I’m telling you this as the media. The government needs to communicate more and better what it is thinking and how it is thinking. Too many things are left for a newspaper article here and there. There are some complex technical issues that need to be addressed as a nation that we can only influence by information.

Having a consensus around those things will make Zimbabwe one of the strongest countries I have seen.

Camille Nuamah: Fact File

• Country of birth: Jamaica.
• Education: Bachelor of Arts, Economics, Columbia University (New York City).
• : Master of Philosophy, Economics, University of Cambridge (Britain).
• : Doctor of Philosophy, Economics, New York University (US).
• Specialty: Industrial organisation economist.
• Previous postings: World Bank country manager Albania (three years); Nicaragua (four years).
• Family: Married to Prince Nuamah, a Ghanaian national, and they have two daughters aged nine and 11 years