JOHANNESBURG - Economic policy under the new Zimbabwean president Emmerson Mnangagwa is aimed at restoring business and investor confidence.
However, business executives and experts want stern action and the right signals from Harare as a way of attracting foreign funding.
Mnangagwa and his cabinet have pledged to tighten public spending, encourage foreign direct investment and restore confidence in the country as an investment destination. Fighting corruption has also been adopted as a cornerstone of enhancing transparency and righting the economy.
Finance Minister Patrick Chinamasa’s 2018 budget statement on Thursday has been a departure from former leader Robert Mugabe’s populist and expedient trajectory, say analysts, but unless the policy measures are actioned, Zimbabwe's economic headaches might not go away.
There has been talk in Zanu-PF corridors that the Zimbabwean dollar might be re-introduced, but experts are cautioning against this even though Chinamasa has tabled measures to boost the financial and banking sector. They would be premised on usage of mobile and plastic money which would be spread to rural areas.
The government will continue to prioritise allocations of foreign currency to deserving “producers of essential goods” and services.
Chinamasa said “the prevailing cash shortages continue to impose untold hardships on the generality of the population, particularly among the poor and rural” areas.
In response to the budget, former finance minister Tendai Biti said: “There is a real danger that the regime may reintroduce the Zimbabwe dollar. The country is years away from having sufficient reserves to support a currency.
"Besides, once you dollarise you can’t go back - it is a confidence issue.”
He said Chinamasa’s projections that Zimbabwe would grow by 4.5percent in 2018 were unlikely and that a growth rate above 2.5percent was more modest. It was also prudent for the country to adopt cash-budgeting and set aside the deficit budgeting regime as it faces a $3billion (R41bn) budget deficit which would be difficult to correct.
The Zimbabwean treasury chief acknowledged that “money creation, through domestic money market instruments which do not match with available foreign currency weaken the value of the same instruments” and translates to “rapid build-up in inflationary pressures.
Under the new policy measures, Zimbabwe has committed to maintaining the debt to gross domestic product ratio below 70percent and to put a ceiling on government borrowing flexibility from the central bank at 20percent.
Vacant posts in the public service have been frozen and non-essential human resource hiring has also been put on ice while civil servants above the age of 65 will be retired next year as part of bitter pills to swallow under the new administration.
“Government is, beginning 2018, putting a stop to unabated flow of budget resources to public enterprises and local authorities without any returns, either through dividends or meaningful public service delivery,” Chinamasa said.
Business strategist Joe Mutizwa said Chinamasa was “striking the right note and making some tough but long overdue choices on cost containment and easing of indigenisation” regulations.
Economists and investment analysts have long criticised the empowerment laws of Zimbabwe, saying they deterred investments.
“It is vital that the projected budget deficit is not exceeded. We are on right path,” said Mutizwa.
Economist Moses Moyo told Business Report on Friday that the new policy measures introduced by Zimbabwe “should be followed up by stern action” and “strict” monitoring, especially on reforms.