Transcript STRATEGIC PLAN

Economic Outlook for Zimbabwe
in the Context of Zim Asset, The
Budget and The Monetary Policy
Presented by
Moses Chundu (Msc Economics)
IAC Breakfast Seminar on the Economy
7 February 2014
Introduction-Economic Highlights

Zimbabwe economy stuck in a rut as national
aggregate demand continue to fade and
economic output trend downwards.…

The current account deficit continues to widen

Attracting FDI still a challenge

Inflation continues to recede as aggregate
demand tumbles

Agriculture – Tobacco, a bright spot in a
darkening economy, serious grains deficit
anticipated
Introduction-Economic Highlights

Mining and Quarrying: Pressure continues to
mount as capital remains scarce

Tourism: Arrivals are trending upwards as
occupancies improve

ICT: Competition is on the rise in telecoms

Manufacturing Sector in Limbo

Banking: Worsening NPLs, the albatross around
the banking sector’s neck
Introduction-Economic Highlights
GDP at market prices
2009 2010
2011
2012
Actual Actual Actual Est.
2013
Proj.
2014
Proj.
2015
Proj.
5.4
3.4
6.1
6.4
11.4
11.9
10.6
Zim Asset-the Pillars
‘Zimbabwe experienced a deteriorating economic and
social environment since 2000 caused by illegal economic
sanctions imposed by the Western countries’. Pg 1

The implementation of Zim Asset will be underpinned
and guided by the Results Based Management (RBM)
System, since the 1990s

Zim Asset is a cluster based Plan, not new

National Corporate Governance Framework will be
launched and implemented-endemic corruption

Value addition will be key-not a novel policy stance, has
remained statement of intent for decades now
Nothing new in the above pillars of the Plan.
Failure to establish causality will be its downfall
Zim Asset-Funding Dilemma
The Plan to be funded from,

tax and non tax revenue, -firms closing

leveraging resources, -lack of transparency

Sovereign Wealth Fund, -not now cannot save

issuance of bonds, -no takers-trust issues

accelerated implementation of Public Private
Partnerships,-corruption main challenge

securitization of remittances, -not easy

re-engagement with the international and
multilateral finance institutions and-difficulty

other financing options, focusing on the BRICS.-not
interested in us but our resources
2014 Budget
‘Business confidence remains low and Zimbabwe’s
country risk premium is still high. The result is a lack of
investment and financial inflows required to drive
future growth’. Min Chinamasa

The 2014 National Budget, consequently seeks to
facilitate the implementation of ZIM-ASSET
programmes

Central to this is recovery of both public and
private investment in the economy.
Minister was spot on but his subsequent pronouncements
are addressing other issues not the above issues, if anything
making it worse e.g. stance on indigenisation.
2014 Budget

Budget sought to effect the principle of value
addition by revamping the duty regime.

The targeting of industries and products has not
been strategic at all, needed more consultation.

Value addition means investments and as long as
confidence issue are not addressed, the support to
Zim Asset will not materialise.

Funding gap will remain a challenge in the absence
of deficit financing in a multicurrency regime.

The role of the sovereign wealth fund and timing of
its launch demonstrates a deficit of knowledge of its
make up and functions.
2014 Monetary Policy statement
‘I remain optimistic that the economic prospects for
Zimbabwe will not disappoint, provided we decisively
and holistically implement all the ingredients as
embodied in Zim-Asset’. Acting Governor Dhliwayo.

MPS a failure from the onset given the impossibility of
fulfilling the above assumptions.

Proposed measure below not new and therefore will not
work miracles on their own.

Bound to fail for the same reasons previous interventions
failed, need to deal with fundamentals of economic
management.
2014 Monetary Policy statement
Proposed policy measures include;
 Enhancing role of the Reserve Bank -lender of last
resort;
 Capitalization of banks-extension of compliance;
 Consolidations and Mergers-of small banks
 Insider Loans and Non-Performing Loans; No more
 Enhancement of Supervision through Amendment
to the Legal Framework;
 Gold Mobilization;-legalising makorokoza
 Use of electronic means of payments to enhance
financial inclusion; and
 Enhancing Export Receipts-reducing overdue CD1s
The Real Challenge

Zimbabwe facing a governance crisis, the recent cashgate
issues just tells of the extent of the rot in governance
circles both in government and private sector.

Corruption tax is too high in both government and
private sector.

Competitiveness is more affected by corruption ahead
of the other causes that are fronted like infrastructure
and liquidity, these are symptoms.

What is reported on the $144m HCC Chinese tender is
happening at all levels, ending up producing goods that
are 2-5 times our regional competitors.

The porous ZIMRA system and duty regime not helping
either.

Archaic labour law regime adding salt to the injury.
The Outlook-The Sad Reality

Economic activity to remain depressed with more
company closures expected.

Liquidity challenges to persist in the outlook.

Confidence in the banking system to remain low
thus locking the little liquidity away.

If multicurrency regime is maintained the economy
will just go by registering negligible growth figure
way below the projected numbers-less than 2
percent.

Government revenues will remain squeezed against
the backdrop of a blotted and populist government.
The Outlook-Game Changers

The questioned legitimacy of the government no longer
an issue, the government is here to stay, the best that can
happen is for the present government to respect basic
principles and laws of economic management and avoid
the populist trap as it has always backfired.

To avoid total collapse government will have to avoid the
dual temptation of Z$ reintroduction and controls.

The real game changer will be the attitude of
government towards addressing corruption that is now
endemic at all levels of society.

Bringing perpetrators to account without fear or favor
and upholding the doctrine of restitution ahead of
retribution, recovery ahead of imprisonment.
The Outlook-Game Changers

Merit based appointments in all key institution and
injection of new blood to drive institutions into the
future-no recycling of deadwood starting with cabinet
all the way down. Balancing loyalty and
performance/competence

Clear and better signals on key policy areas affecting key
means of production eg. Land reform, and indigenisation
laws.

Immediate review of labour laws away from the tired
principle of collective bargaining which creates
unemployment to competitive productivity linked
industry/firm specific wages negotiations.

Implementing a duty regime that promotes winners and
not losers or speculators. Protection not for its sake but
to preserve jobs in competitive industries.
Thank you