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Correct key macroeconomic imbalances, Zim govt urged

May 13 2016 08:46
Memory Mataranyika

Harare - Hard-pressed Zimbabwe needs to correct its political framework and the macro-economic imbalances that have seen investments wilt and exports tumble, top analysts said on Thursday.

Zimbabwe will grow by about 1% this year, according to economists' projections.  The key agriculture and mining sectors have suffered drought as well as low price conditions.

"To raise growth from its current medium term trend of 1–2%, Zimbabwe will need to correct key macroeconomic balances.
 
"Capital flows, including external borrowing and asset sales, are sustaining consumption growth by financing an unsustainably high current account deficit," Kipson Gundani, economist with the Buy Zimbabwe pressure and lobby group, said on Thursday.

He added that what little growth Zimbabwe has managed in the past few years has largely been "driven by consumption", while public and private investment has fallen significantly.

Other economists said Zimbabwe should focus on the primary problem that has afflicted the country, which is an uncertain political framework.

Pedzisai Ruhanya, director for the Zimbabwe Democracy Institute, said: "... the big problem Zimbabwe faces is the politics of the country and the uncertainty this is bringing."

President Robert Mugabe's Zanu-PF party is divided over his succession. The long-serving leader has not named a successor and is even preparing for fresh elections in 2018, despite being 92 years old.

Zimbabwe announced that it would introduce a local bond currency hedged by a $200m Afreximbank facility to help ease cash woes in the economy, which currently uses a multiple currency regime.

Banks have been running out of cash while a withdrawal limit of $1 000 has now been ordered.

"Without exchange rate policy, tackling today’s current account deficit and low investment ratios will require real improvements in productivity and adjustments in public spending, both of which take time but also have a more durable impact on competition," added Gundani.

Government officials and industry executives will gather in Kariba next month for an indaba on measures to reduce the country's high import bill and over-reliance on imports, mostly from South Africa.

Zimbabwe quickly negated the strong recovery notched up between 2009 and 2013 when the country ditched its own currency and adopted multiple currencies to stabilise the economy and contain hyper-inflation.

"The fundamentals for this recovery are still strong, but the headwinds are increasing. Traditional sectors – agriculture, mining and industry - are facing key challenges in the process of structural transformation," Buy Zimbabwe said.

zimbabwe  |  africa economy
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