Zim needs urgent economic solutions: AfDB

HARARE - Zimbabwe needs urgent solutions to economic challenges highlighted at its August High-Level Economic Forum to maintain a growth trajectory, the African Development Bank (AfDB) says.

The Finance ministry convened the high-level forum in Victoria Falls and identified low gross capital formation; huge external debt; lack of industrial competitiveness; weak regional integration; high levels of poverty; and, the absence of a unified vision for the country as challenges hindering the country’s economic growth.

“The challenges are an indication that the economy is still constrained (and) urgent solutions to the challenges are required if the current growth momentum is to be sustained,” said AfDB in its September Zimbabwe Monthly Economic Review.

Finance minister Tendai Biti in his remarks at the meeting, had proposed the leveraging of the country’s abundant human capital, natural resources, geographical location, demographic distribution, information and communication technologies, fairly decent infrastructure and globalisation.

He said the conference resolutions will be factored into the 2013 National Budget and other national economic policies.

Major proposals made by a host of experts from the AfDB, International Monetary Fund (IMF) and World Bank included a relook of the Indigenisation policy and bringing in more flexibility to attract foreign direct investment.

Experts also said that there was need for more research and value addition, with the extractive sector calling for reduction of royalties to allow profitability and competitiveness on the global market while the agriculture stakeholders proposed longer land tenure in order to secure funding.

Last week, the IMF said Zimbabwe was likely to achieve a four percent average economic growth rate for 2012 if its policy remains unchanged.

The IMF figure comes on the back of a forced downward review of the country’s growth targets to 5,6 percent Biti in July on account of underperformance in agriculture and below target diamond revenues trickling in from Marange mining operations.

“Real GDP growth in 2012 is projected to slow to five percent, reflecting the impact of adverse weather conditions on agriculture, erratic electricity supply, and tight liquidity conditions,” the Bretton Woods institution said.

“The medium-term outlook, under an unchanged policy scenario, is for growth to moderate ….., although constraints on energy supply and weak competitiveness may pose a challenge to achieving these rates.”

The IMF said the Zimbabwe’s position would be worsened by its failure to clear external arrears which now stand at close to $11 billion and more than 113 percent of gross domestic product.

The IMF said Zimbabwe’s usable international reserves remained very low at 0,3 months of imports at end-2011, amplifying its vulnerability to external shocks.

The global institution said a vigorous structural reform programme and strengthened macroeconomic management would allow the country to sustain higher rates of growth.

“To achieve sustained and inclusive growth, directors stressed the importance of full commitment to policies focusing on strengthening fiscal management, reducing financial sector vulnerabilities, and improving the business climate,” the IMF said.

“Directors urged the authorities to fully implement the measures announced in the mid-year fiscal policy review, and take additional measures if necessary, to address earlier slippages and close the financing gap.”

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