‘2016 a transformative year’

via ‘2016 a transformative year’ – Newsday December 10, 2015

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya says 2016 will be a transformative year, aided by the country’s re-engagement with financial institutions, resolution on non-performing loans (NPLs) and good policy mix to boost business confidence.

Speaking at the Confederation for Zimbabwe Industries (CZI) internal devaluation symposium yesterday, Mangudya said government was already making strides in addressing the cost of doing business, which include a re-engagement process with the multilateral institutions to unlock new capital, setting up of the Zimbabwe Asset Management Company (Zamco) and good policy mix.

Zamco is a special purpose vehicle created last year to buy bad debt from the banking sector.

“2016 is a transformative year, we are going to transform this nation,” Mangudya said.

He said the re-engagement process was well on course to unlock new capital, good policy mix and addressing the non-performing loans which can drag down the economy will increase confidence in the market.

“Zimbabwe has kwashiorkor of capital, for the past years we have not been able to retool and buy new capital equipment. Re-engagement is to unlock new capital and, so far, we are on track on the re-engagement process and Staff Monitored Programme [SMP] targets are going to be measured by the end of the year and we should meet target,” he said.

In October, Zimbabwe’s plan to clear its $1,8 billion arrears to the International Monetary Fund (IMF), the World Bank and African Development Bank was approved by the three creditors. Zimbabwe has to clear the arrears by June next year.

Mangudya said the economy has to undertake internal devaluation to reduce the cost of doing business and become competitive.

“Zimbabwe is an open economy, let’s not close an open economy.

If you close what is open you are at risk of leakages. We need to have policies to manage the cost of doing business and a way to stimulate domestic demand and that is our challenge,” Mangudya said.

World Bank senior country economist Johannes Herderschee said the current concern with Zimbabwe was that all prices are falling in response to lack of demand.

He said Zimbabwe experienced some of the highest growth between 2010 and 2011.

“Like Hong Kong, Zimbabwe is an open economy that depends on trade, exports and imports, for the well-being of its population. Hong Kong responds to challenges and opportunities by changing prices. Prices are flexible,with little government intervention,” he said.

He added that Zimbabwe was moving in the direction of Hong Kong’s policies, but it will be with national characteristics, wages and working hours are increasingly flexible, some will go up others will do down.

“What is happening to Zimbabwe is a massive structural adjustment and some sectors are currently doing well,” He said.

Competition and Tariff Commission chairperson Dumisani Sibanda said government should put in place a legislation that the country can abide by to reduce the cost of doing business.

“Our recovery and growth should be based on the performance of the private sector. As long as the private sector does not perform the economy will remain down,” Sibanda said.

“The government should put in place a legislation to reduce costs.”

Speaking at the same event, CZI president Busisa Moyo said the key cost drivers which need urgent correction are costs on energy, labour, logistic and transport and finance charges among others.