Govt must heed RBZ advice

HARARE - Government must take seriously the advice from Reserve Bank of Zimbabwe (RBZ) governor John Mangudya that the country must address its $10 billion debt issue in an effort to revive the economy.

In his maiden monetary policy statement released this week, Mangudya noted that the country’s outstanding debt has grown to be a constraint on the country’ growth and development aspirations.

“Essentially, a country in arrears attracts offshore loans at unfavourable conditions, on account of the risk premium attached to it. Notably, interest rates are high and conditions precedent on offshore credit facilities become difficult for domestic potential borrowers, even before making any draw-downs,” he said.

Various stakeholders in the country including the Bankers Association of Zimbabwe have been warning that the country’s risk profile was costing banks an additional five percentage points to the cost of capital at a time when the country cannot tap into international funds due to its debt overhang.

Against this background, it is prudent that the expeditious resolution of the country’s debt burden remains critical in efforts geared at unlocking medium to long-term offshore credit lines, required by industry to recapitalise and re-tool.

We concur with Mangudya that the amicable resolution to the country’s external debt in a timely manner should rank high on government’s policy agenda, as this would help ease the country’s tight liquidity situation, while at the same time rejuvenating industrial activity.

Zimbabwe must also end its international isolation and must continue to engage the multilateral and donor community inorder to attract international capital inflows. At a time when the country is experiencing an acute liquidity crisis, the attraction of more foreign direct investment will help ease the current liquidity crisis ad rejuvenate the ailing industry.

It has also come to our realisation that attempts to regain lost export and domestic markets have remained constrained by lack of competitiveness, largely emanating from high production costs.

This reflects the country’s costly production models on the back of outdated and antiquated machinery.

On the other hand, the country’s regional and international competitors have adopted low cost, efficient and advanced technology.

As such, imports have taken over the domestic market as they attract lower prices, while exports have lacked the competitiveness required to capture new and previously lost markets.

On the back of these developments, the need to invest in the latest technology to regain the much-needed competitive edge on the domestic market and international export destinations should be prioritised.

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GALLERYCARTIDGES - 28 August 2014

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