‘Zim needs to rebase economy’

via ‘Zim needs to rebase economy’ | The Herald October 24, 2014

Zimbabwe should diversify its economy and not depend on raw mineral exports to guard against the vagaries of price movements of commodity prices which have an effect to dampen Zimbabwe’s growth prospects, economists say.
The country’s dependency on raw materials exports exposes the economy to price movements which have an effect on the country’s earnings.

The economists say that beneficiation is the bedrock for the country’s economic revival.
USAID strategic economic research and analysis senior advisor Mr Ashok Chakravati said there is need for Zimbabwe to extensively implement its beneficiation initiative in order to start getting the real value of its minerals.

“Zimbabwe’s export pattern is heading sorely towards the export of minerals; this is going to have a big impact on economic growth because if the commodity prices are going to decline, it will have a negative impact on economic growth trends of Zimbabwe.

“There are a few countries that have managed to diversify in East Africa and Zimbabwe’s over dependency on raw material exports is going to have an immense impact on our economic growth,” said Mr Chakravati.

“The compositions of exports in Sub Saharan Africa have raw materials constituting 50 percent of the exports.”Mr Chakravati said IMF highlighted that the growth rate of South Africa is going to decline and that movement is going to have an impact on the economic growth of Zimbabwe considering the current exchange rate between the Rand and United States dollar.

He said companies in Zimbabwe should however take advantage of the existence of sovereign borrowing on the international financial markets to boost their productivity.

“The increase in sovereign borrowing from international markets has increased considerably especially in Zambia where municipalities are now borrowing for various purposes and in that context this becomes more helpful to Zimbabwean companies to exploit that financial market,” said Mr Chakravati.

He said the existence of sovereign borrowing will help Zimbabwe address debt overhang issues as there is potential to get access to international financial markets. Mr Chakravati said Zimbabwe needs to rebase its economy in order` to effectively provide statistics that will influence policy formulation.

“The state of most economies in Sub Saharan Africa is changing and in the case of Nigeria the rebase of their national economy from 1990 to 2000 GDP showed that they rebased about 80 percent up and this should happen also in Zimbabwe considering that our economy has informalised a lot.

“I have a feeling that if we rebase we may find out that our economy is significantly higher than what we suspect it to be,” he said.
Against this expected backdrop, sustaining high growth in the region remains a key policy consideration and will require striking the right balance between scaling up public investment to infrastructure gaps and improve local manufacturing industries.

He said infrastructural growth for Zimbabwe is key for existing activities and business projects to expand and this will also help new sectors of the economy to emerge.

Transport infrastructure is key to drive the revival of the manufacturing sector and the landscape for infrastructural financing is changing hence need for Zimbabwe to consider private investment in some projects than just focusing on PPP’s,” said Mr Chakravati.

Finance and Economic Development Deputy Minister Dr Samuel Undenge said it is the will of Government to amend relations with International financial institutions, in order to unlock funding that will go towards revival of industry and infrastructural development.

“It is our hope as a country that such efforts should eventually culminate to the resolution of our debt situation and hence normalisation of our relations with international financial institutions and all our creditors,” said Dr Undenge.