‘Economy poised for massive growth’

30 Sep, 2016 - 00:09 0 Views
‘Economy poised for massive growth’

The ManicaPost

Kudzanai Gerede Business Correspondent

Zimbabwe’s economy is projected to grow at an annual average rate of 7,3 percent between next year (2017) and 2018 buoyed by a raft of short-term sectoral, micro, structural and rural economy interventions by government as it moves to reduce the proportion of people living in extreme poverty through economically empowering societies, the latest Interim Poverty Reduction Strategy Paper for Zimbabwe; I-PRSP (2016-2018) suggests.

Government will need US$2,7 billion over the next two years to implement planned programmes and projects under the strategy which will focus on creating resilience in communities and ultimately lead to economic growth.

Already Government has secured US$800 million and the remaining US$1,9 billion is expected to be mobilised from local lenders, development partners and international financiers like the World Bank once the country clears its arrears.

The local economy had been on a steady recovery course since the adoption of the multi-currency system which brought some financial stability in 2009 but has since taken a sluggish pace in the past three years as a result of liquidity constraints, low investment flows and poor competitiveness arising from strengthening of the US dollar against major currencies thus affecting national production.

Worsened by poor performance in the agriculture sector which sustains over 70 percent of local livelihoods and industrial supplies due to erratic rainfall patterns, many jobs have been lost and poverty levels have surged.

Momentum in economic performance has slowed down from 3,8 percent (2014) to 1,5 percent (2015) and official figures for full year 2016 have been projected at 1,2 percent, a figure far below the annual regional average of 5 percent.

The blueprint hence seeks to reduce the current account deficit from current levels of over 20 percent of Gross Domestic Product (GDP) to below 10 percent whilst the budget deficit should be capped to at least 1,2 percent of GDP.

To achieve this, Government envisions expanding the economy through putting in place pro-productive policies to support conventional productive players at the same time cultivating an emerging micro and medium enterprises sector which has stamped its huge footprint across the country’s economic dispensation.

With the two sectors complementing each other, this will increase both employment figures and Government tax base which is expected to mitigate recurring annual budget deficits.

Private sector support in productive sectors of manufacturing, mining, energy, information communication technology and tourism, SMEs, inclusive banking and housing will be the panacea to the growth of the economy and poverty reduction by creating opportunities in the labour market.

Manufacturing is hence expected to contribute 30 percent from current 11 percent and this will be achieved through value addition of raw products as enshrined in the Industrial Development Policy with Government prioritising four sectors of Agri-business ( food and beverages, clothing and textiles and footwear and wood and furniture), fertilizer and chemicals industry, pharmaceuticals, and metals and electrical.

Strategies for manufacturing sector include enhanced co-ordination of the different taxes and levies collection to reduce inefficiencies, establishment of Special Economic Zones, access to affordable credit to resuscitate ailing industries and attracting FDI.

The mining sector will be buoyed by the financing models earmarked for small scale mining such as the US$100 million with the XCMG China being pursued while high operational costs across all facets of production are being addressed in the ease of doing business reforms.

Speaking at the launch of the I-PRSP at Miekles hotel in Harare this Monday, Minister of Finance and Economic Planning Patrick Chinamasa said infrastructure development will be crucial particularly in the transport sector which has already began with the dualisation of major highways and the pursuit of a partners to resuscitate key state enterprises like the NRZ which will reduce transportation costs.

“Proposed interventions are centred around guaranteeing food security through special maize production, enhancing productivity, expanding irrigation rehabilitation and development in view of the risks associated with climate change, providing access to sustainable and affordable capital, access to markets for agriculture commodities and revival of agricultural parastatals.

“On our part for the 2016/2017 agricultural season, we are putting our money where our mouth is. Already Government secured more than US$423 million towards supporting the 2016/2017 season and the objective is to be self-sufficient in food security in the event that heavens smile on us and give us normal rains this season,” he added.

However analysts have raised concerns about Government capacity to acquire funding of various projects which cut across socio-economic challenges in the country at a time when the fiscal deficit was widening amid thinning revenue base but Minister Chinamasa expressed confidence in the country’s ability to clear its arrears by year end in order to unlock fresh credit lines.

“The estimated resource requirements for the implementation of planned programmes and projects underpinning this I-PRSP amount to at least US$2,7 billion over the two-year duration to 2018.

Of this amount, approximately US$800 million is already secured under the on-going poverty reduction related programmes by both Government and Development Partners.

“This leaves a balance of about US$1,9 billion to be mobilised through the national budget, co-operating partners as well as other domestic and external sources. At this juncture Treasury intends to use this document as a basis for negotiations to secure funding from the World Bank in the event that Zimbabwe-World Bank relations are normalised following successful clearance of arrears. The document will also be used in guiding Government policy formulation,” said minister Chinamasa.

Zimbabwe presented its arrears clearance strategy at a meeting with international creditors late last year in Lima, Peru which is expected to open fresh credit lines to resuscitate distressed productive sectors that will be crucial in its re-industrialisation course.

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