Tawanda Karombo Harare
ZIMBABWE must put in place operating parameters for the acquisition of bad bank loans by the end of the year and submit recommendations to fix the mining sector’s fiscal regime by June as part of new reforms that the International Monetary Fund (IMF) will monitor.
Other benchmarks that had been set for the IMF monitored economic policy reform programme included finalising amendments to the central bank governing law, amendments to procurement and banking laws and the official gazetting of “the necessary clarification on the indigenisation and economic empowerment act” by June, the IMF said yesterday.
Antoinette Sayeh, the IMF Africa department director, said yesterday that “economic conditions in Zimbabwe remained difficult”. She will conclude her visit to Zimbabwe today.
Zimbabwe is beset by economic troubles that have seen its debt arrears balloon to about $10 billion (R110bn) and the rate of non-performing loans bloat to 18 percent.
Takunda Mugaga, an economist at Harare-based Econometer Global Capital, said economic trends were still tipped in the direction of deflation.
The government should speedily set into operation the Zimbabwe Asset Management Company, a state-owned asset company that is expected to mop up non-performing loans from the banking industry.
In an IMF note, on targets and benchmarks for the new staff monitored programme, the executive committee of the Reserve Bank of Zimbabwe should have approved “the draft operational framework” for the acquisition of non-performing loans by December.
Sayeh had told Zimbabwean authorities that restoring confidence and stability in the financial services industry was critical in mapping the way towards stabilising the economy.
The government also needed to enhance the business environment to better attract investments into the country, she added.
Deputy Finance Minister Samuel Undenge said Zimbabwe was working towards reviving its economy although debt arrears were hobbling such efforts.
Projections by the government and financial institutions such as the World Bank put Zimbabwe’s economic growth for this year at about 3.1 percent, a massive revision from Finance Minister Patrick Chinamasa’s initial projection of 6.1 percent.
“The country is currently battling with a huge debt overhang, which is negatively undermining economic growth and development,” he said.
Clearance of arrears is crucial for Zimbabwe as the IMF recently said it would not approve new lending for the country until it cleared its debt. This has left the country, whose fiscus is tightly squeezed, unable to fund infrastructure development projects, a situation that has also been blamed on its bloated civil service, which is gobbling over 60 percent of state revenue.
The IMF staff monitored economic policy reforms are part of the country’s debt resolution strategy. The programme aims to consolidate Zimbabwe’s fiscal position and improve its external position; mobilise international community support; and attain structural reforms in key sectors, such as mining and finance, that are key in enhancing the business climate and boosting productivity and competitiveness, according to Undenge.
International investors are worried about the country’s operating and legislative framework, with fund managers saying the country should speedily fix this. Under the indigenisation law, foreign companies are mandated to cede 51 percent of shares to black Zimbabwean groups.
Last week, the government announced that almost all foreign banks in the country – which includes Standard Bank, Standard Chartered, Nedbank and Barclays – had agreed to give away majority shares to local groups
“It continues to worry investors and the political uncertainty over President Robert Mugabe’s succession is creeping into the puzzle because of recent developments which have seen Vice-President Joice Mujuru, a moderate compared to others in Zanu PF, being verbally attacked by the president’s wife,” an official at a Harare advisory company said.