HARARE – Zimbabwe requires strong capital markets to help it achieve a middle income status by 2030, Finance ministry permanent secretary George Guvamatanga has said.
This comes as research has shown that a positive link exists between the sophistication of the financial system and economic growth.
“There is need to build well-functioning capital markets to contribute to vision 2030 and short-term transitional stabilisation programme,” the former Barclays Bank Zimbabwe managing director told The Financial Gazette on the sidelines of a reception hosted by Invesci for Chartered Financial Analysts (CFA) in the capital last week.
Guvamatanga indicated that it was crucial for professional bodies such as the Investments Professionals Association of Zimbabwe (IPAZ) and CFA institute to be actively involved in the development of the country’s capital markets.
Capital markets play an important role mobilising savings and channelling them into productive investments for the development of commerce and industry. As such, the capital market helps in capital formation and economic growth of the country.
Guvamatanga said government’s vision of an upper middle income economy by 2030 will also encompass domestic resource mobilisation and there’s need for strong capital markets to mobilise resources from the domestic market.
“The fact that we now have 100 chartered financial analysts is a welcome development as these will contribute to efficient capital market in Zimbabwe,” he added.
In most underdeveloped countries where capital is scarce, the absence of a developed capital market is a greater hindrance to capital formation and economic growth. Even though the people are poor, yet they do not have any inducements to save.
Others who save, they invest their savings in wasteful and unproductive channels, such as gold, jewellery, real estate and conspicuous consumption.
Such countries can induce people to save more by establishing banking and non-banking financial institutions for the existence of a developed capital market.
Such a market can go a long way in providing a link between savers and investors, thereby leading to capital formation and economic growth.
However, in developed economies there is a greater share of investment that is allocated to relatively fast growing sectors.
Meanwhile, CFA president and chief executive Paul Smith, who was addressing graduates at the event, was optimistic that Zimbabwe would come up with viable solutions to the current crisis.
“I have no doubt that Zimbabwe’s future is bright considering the outstanding quality of people I have met on this visit.
“I’m glad that you (Zimbabwe) recognise your problems therefore you really know what to do, as CFA Zimbabwe society will keep on producing professionals that will help you climb out of the problems you are facing,” he said.