Former CZI President Busisa Moyo
HARARE – Zimbabwe needs up to $4 billion to avert a looming currency crisis that could unleash economic havoc, with the new Cabinet urged to take tough decisions to increase confidence in the economy.
President Emmerson Mnangagwa on Friday appointed former banker Mthuli Ncube as Finance minister and retained Winston Chitando in the key mining portfolio, tasking two competent technocrats to steer the quest to revive the country’s stuttering economy.
This comes as government has been moving away from market-friendly economic policies toward a more populist attitude that grants generous government subsidies on everything from agriculture to social programmes.
The government has been reprimanded by the International Monetary Fund for high government spending and foreign debt, with the Bretton Woods institution calling for comprehensive structural reforms.
Critical cash shortages and foreign currency limitations have been inhibiting investment where hard currency to fund imported inputs is needed.
This comes as there is a willingness to invest and amid concrete proposals from multinationals, among others, but structural impediments continue to discourage some potential investors.
This implies a subtle shift in focus away from the elections themselves to the post-poll period.
This comes as the economy is a mess, the regulatory environment is a nightmare and there is no foreign currency to assist investment when it knocks on the door.
Industrialist Busisa Moyo said the September to March period required a forex boost in order to achieve economic growth.
“Zimbabwe since the 1960s has had a cyclical inflow of foreign currency due to its dependence on agriculture,” Moyo told the Daily News on Sunday.
“The bulk of export earnings are received between April and August post-harvest.
The dry period in terms of forex starts to bite around September and ends in March.
“An agricultural input some of which are imported and festive season stocking up which requires both finished goods and raw materials further puts pressure on imports and foreign currency.
“This dry forex period needs a financial structure or package in order to smooth financial flows; this can be in the form of a loan advance or a structured financial package.
“We could need $4 billion to March, to achieve some growth in economic activity,” he said.
This comes as President Emmerson Mnangagwa failed to secure a $2bn loan from China to clear arrears to multi-lateral institutions under the Lima Plan — a payment plan agreed with foreign lenders in 2015 in the Peruvian capital.
In meetings with President Xi Jinping last week, Mnangagwa tabled the request for a bailout package to bankroll productive sectors such as tourism, mining, industry, agriculture and manufacturing, among others.
But China was reportedly edgy about extending fresh loans to Zimbabwe, citing its $300m arrears from previous loans.
Zimbabwe is now banking on accessing part of $60 billion in financing for Africa unveiled by Xi during the opening of a major summit with African leaders last week.
Xi, addressing leaders at Beijing’s Great Hall of the People last Monday, said the new $60 billion will include $15 billion of aid, interest-free loans and concessional loans, a credit line of $20 billion, a $10 billion special fund for China-Africa development, and a $5 billion special fund for imports from Africa.
Reserve Bank governor John Mangudya, who travelled with President Mnangagwa’s delegation, told Chinese State media: “Zimbabwe’s economic development hinges on the access to capital and in that vein we are excited that the $60 billion package announced by President Xi Jinping is going to be accessible to African countries.
“We as Zimbabwe we are taking this matter seriously and engage with other financial institutions here and see how best we can make the economy improve through such lines of credit.”
Moyo said the only way to get the funds would be financial borrowing.
“As a country we import $6-7bn of commodities including fuel and raw materials per annum while our imports are half that, so we have annual import deficit of about $3bn ($250m per month), this means $1,75m for seven months, but because the bulk of outflows go out for agricultural inputs and festive season raw materials and finished good demand, this amount is uneven during the latter half of the year and reaches circa $2,3bn driven by the period September to December although it comes off slightly in January-March period,” he said.
Moyo also cited with concern the increasing backlog of monies in the queue for foreign currency.
He said farmers and the private sector need foreign currency for re-tooling.
Analyst Eldred Masunungure concurred with Moyo, saying the country was in dire need of financial assistance.
“Government is in very dire financial straits, going forward hence the imperative for robust re-engagement with the international community especially the IFIs (international finance institutions).
“China can also come handy with support including agricultural inputs such as fertilizers , pesticides amongst others,” he said.
Gary Van Staden, an analyst at NKC African Economics said: “There is a long track ahead, but Zimbabwe appears to have at least found the tunnel at the end of which some light may eventually appear.
“We believe the information we have, our sources and the analyses we have done suggest the Zanu PF victory and that of Mnangagwa was most likely legitimate.
“It may have been ugly, flawed in places and skewed — suggesting electoral reform is now a necessity — but the polls were not stolen, the opposition just let it slip.
“Several imperatives now appear: Mnangagwa must keep his promises and introduce a range of economic and political reforms designed to set Zimbabwe on a path to recovery at all levels and in all kinds of ways.
“Real compromises and tough decisions need to be made by all parties in the country and the opposition MDC-Alliance in its various forms and factions needs to now look at its own failures rather than look to blame someone else.
As for South Africa and the role it can play inside and outside of the Sadc, we expect to see real constructive engagement because the rest of the international community is going to lag, Van Staden said.