World Bank gloomy on Zim economic growth

The international financial institution projected that economic growth would subsequently sink to 0.6 percent, warning of the possible danger of the growth rate turning negative in 2017 if no meaningful reforms are carried out to attract general investment.

Finance Minister Patrick Chinamasa has admitted that he does not have a clue how to fix the economy, adding that he does not know why it deteriorated in the post-election period.

Companies are closing down in their hundreds and unemployment is rising, crippling government efforts to raise revenue.

Government, in recent months, has had to shift pay dates for civil servants because of a liquidity crunch and is failing to fund critical public programmes.

It recently toned down on its indigenisation policy which forced foreign companies to surrender majority shareholding to black Zimbabweans, now preferring to adopt a sector specific approach.

However, investors have assumed a wait-and-see attitude, showing no eagerness to plough their capital into the ailing economy as yet.

Further, the country has moved from hyperinflation to deflation—a trend whereby there are too many goods and little money to purchase them with, thereby reflecting a slowdown in economic activity.

According to the Zimbabwe National Statistics Agency (Zimstat), the economic is into its fourth month of deflation, since February.

The agency put the year-on-year inflation for May 2014 at -0.19 percent, as reflected by the Consumer Price Index.

Businesses have suffered because of the deflation as their sales have generally gone down.

Meanwhile, Zimbabwe is saddled with huge international loans that it is failing to service.

It owes hundreds of millions to such institutions as the WB, the International Monetary Fund (IMF), African Development Bank (AfDB) and the European Investment Bank (EIB).

During a recent visit, EIB’s division chief for southern Africa and the Indian Ocean region, Deiderick Zambon, said Zimbabwe would not receive preferential treatment from the bank.

“We are a commercial bank and we don’t have a prerogative to forgive debts like our colleagues at the World Bank (WB) or the African Development Bank,” he said.