via Commodity prices decline to affect Zim growth rates October 24, 2014
THE decline in commodity prices is set to affect Zimbabwe’s growth rates, an economist said yesterday.
The International Monetary Fund (IMF) has projected a drop in commodity prices on the world markets, warning that a further slowdown in other commodity prices, especially coal, gold, iron ore and platinum, would affect a wide range of countries in the region.
Speaking at the IMF breakfast meeting held yesterday, United States Aid Strategic Economic Research and Analysis programme and Nathan Associates senior advisor Ashok Chakravarti said the decline in commodity prices had already seen copper and gold prices fall by between 10-15% going forward while base metals even more by 30-35%.
“So, since Zimbabwe’s export structure is specifically going in that direction depending on exporting minerals and minerals-related product, this is going to affect us. I think this is going to have an impact on us because if commodities are going to decline, certainly that will affect the growth rate in Zimbabwe,” Chakravarti.
“Our exports and imports are 100% of gross domestic product directed to South Africa. As pointed out by the IMF, the growth rates in South Africa are going to decline and that will have an effect on us.”
Chakravarti said the government also needed to address the debt overhang that is threatening the nation.
Zimbabwe’s total debt is over $9 billion and this has hamstrung its ability to access cheap financing on the international capital markets.
Chakravarti said there was need to look at the structure of the economy which is now informalised.
Chakravarti said the country had become a victim because of the introduction of the multi-currency system in 2009.
“Zimbabwe is in a dollarised environment. We have become a magnet for the region and our industries are collapsing,” he said.
Chakravarti said the country needed to do an internal devaluation working with the Ministry of Industry on the cost drivers.
He said the country has high cost drivers in terms of wages and even regulation compared to the region.
Reserve Bank of Zimbabwe deputy governor Kupukile Mlambo, speaking at the same breakfast meeting, said Zimbabwe was one of the countries that were failing to access capital markets.
Mlambo said the country had a big challenge because government revenue was 28-30% of GDP.
There is limited room for the country to increase taxes and most of the industries are informalised.
Mlambo said the country needs to address neighbourhood effects, for instance, that South Africa growth rates were going downwards, meaning that they would not buy Zimbabwe goods because the economy is not growing.
“My worry about Zimbabwe is our economy is not rising to that Africa rising story. As Zimbabwe, we registered growth between 2009-2012 and now we are not responding to growth,” he said.
Mlambo said the country should be persistent in meeting the Staff-Monitored Programme benchmarks.
He said the country needs to address impediments in doing business, invest in energy and follow fiscal policies on the expenditure side.
“Our trade with South Africa is suffering. We have prices in United States dollars and they trade in the rand. I agree with you on internal devaluation,” he said, referring to Chakravarti.
“As a continent, we have not engaged the emerging economies at the World Trade Organisation. We are not addressing the Asian markets. We need to diversify our exports market.”
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