via Economy haunts clueless Zanu PF – DailyNews Live by John Kachembere and Kudzai Chawafambira 4 MAY 2014
Any hope that Zimbabweans had of a quick economic recovery were dashed last week when government admitted that it had failed to pay its external debt — amounting to over $10 billion amid concerns of more suffering in store for the people.
Economic analysts say with Zimbabwe’s poor debt payment record, it will be difficult for any international lender to extend credit lines to the country.
Finance minister Patrick Chinamasa last week said the country was failing to access new financing, which was critical for economic revival, because Zimbabwe was in arrears in servicing its external debt.
“No one wants to lend Zimbabwe money anymore because we have defaulted in the past. Whether we go to Zambia or to Malawi, it’s the same thing because we are indebted to these countries. We are on our own and we have to be more innovative,” said Chinamasa at the Zimbabwe International Trade Fair business conference.
The southern African nation — with a poor debt payment record and risks losing assets over failure to clear liabilities — is currently engaging International Monetary Fund (IMF) towards revising the country’s debt overhang estimated at $10,7 billion.
Harare-based economist John Robertson told the Daily News that government has to make new choices to change policies which can attract investors.
“People are reluctant to forgive debts, let alone offer any financial relief if we don’t change policies that got us into this mess. The more time we take to fix our economy means we will require more money to get things right,” he said.
Robertson indicated that government should prioritise rebuilding productive capacity but this requires a lot of capital.
“We can only address our economic inefficiencies by making sure we use internally-generated resources. At the same time, our behaviour is very bad, we need to change our behaviour in order to implement policies that are clear and can be able to attract investment inflows. At the moment we are in a precarious situation,” he said.
Economist Godfrey Kanyenze said the only solution to the economic problems lies in Zanu PF transforming the way it is governing the country.
“Many lenders are waiting to see how Zimbabwe performs on the IMF debt clearance plan agreed on last year before they can part with their funds,” he said.
Kanyenze said despite the agreement, the government is failing to implement resolutions that will put the country’s economy on the road to recovery and as such, no-one wants “to throw their money into a pit”.
“When an IMF team visited early this year to assess progress, they found that Zimbabwe had ignored some of the issues agreed on — issues such as reducing the public sector wage bill and minimising the vulnerabilities in the banking sector,” he said.
Another economist Christopher Mugaga said what is urgently required, without regret, is pursing the formalisation of negotiating the repayment of debt.
“Chinamasa remains in a Catch 22 situation. He alone cannot do much on the economic turnaround. On behalf of government, the Finance minister needs to implement the Staff Monitored Programme in good faith,” he said adding that as a country, we also need to align our policies with international standards.
“For instance, the ratio of government’s wage bill to the country’s Gross Domestic Product (GDP) should be reasonable and conform to global norms,” Mugaga said.
Socio-economic commentator Francis Mukora said it would be impossible for other countries to chip in with financial assistance given the deteriorating economic conditions in the country.
“I doubt if there is anyone who is willing to extend loans to a country with a bad reputation for failure to repay and is saddled with a non-performing economy — leaving Zimbabwe with no capacity to service such loans,” he said.
Zimbabwe’s efforts to secure $27 billion to fund its ambitious economic blueprint — the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) — were dealt a major blow when China indicated that it would not extend any budgetary support to the cash-strapped nation.
The Asian giant, generally considered an all-weather friend of Zimbabwe, said its foreign policy does not allow it to provide budgetary support to sovereign nations.
Cognisant of the worsening economic situation in the country, President Robert Mugabe recently pleaded with foreign investors to come and invest in Zimbabwe despite threats of the indigenisation policy.
Mugabe said the controversial policy, which forces foreign-owned firms operating in the country to cede 51 percent of their shareholding to locals, was misunderstood and he vowed to uphold property rights.
However, market experts argue that despite Mugabe’s calls for investors to consider Zimbabwe as an investment destination, a lot has to be done to assure investor confidence over the indigenisation policy.
A recent report by the Consultancy Africa Intelligence (CAI) maintains that “for economic empowerment programmes to succeed, policy implementation must be transparent for foreign investors to maintain or increase Foreign Direct Investment (FDI) flows into the host country.”
CAI, however, cautioned on the need for policy clarity on the protection of property rights.
“But there has been a significant increase in FDI outflows because the law, when enacted, lacked clarity on the protection of property rights,” read part of the report.
Zimbabwe’s failure to pay external debts is also cascading down into parastatals and individuals who are defaulting on servicing their loans.
This comes after Old Mutual Financial Holdings recently noted that nearly 72 percent of the $10 million loans disbursed by CABS to the youth under the Zimbabwe Youth Council (ZYC) since 2009 are non-performing.