The Governor Dr. J.P. Mangudya Zimbabwean Reserve Bank writes a special piece on the Zimbabwean economy, not as bleak as the one Finance Minister P.A. Chinamasa wrote in mid-year report of 2016. The Monetary Policy Statement (MPS), of January of 2017, as still evident of the issues in the Zimbabwean economy. With the knowledge of the debt-burden that has arisen together with the suspended international loans, the state funds has funds dwindled. Also, the monetary and fiscal prudence has been weakening as told by the governor of the Reserve Bank. The Governor even called the Zimbabwean Economy an “albatross”, the rest of it says it all.
Zimbabwean economy needs to catch up:
“The positive spin-offs from the recent removal of Zimbabwe from the International Monetary Fund (IMF) remedial measures, following successful clearance of its arrears to the Fund in October 2016, are also expected to go a long way in reducing Zimbabwe’s country risk, thus attracting the much needed foreign investment. Completion of the clearance of external debt arrears to the rest of the international financial institutions – African Development Bank (AfDB), World Bank and European Investment Bank (EIB) – is expected to further reduce the country’s debt burden that continues to be an albatross on Zimbabwe’s access to foreign finance for the past 16 years now at a time when other emerging markets have been making tremendous strides in their economic transformation. As a consequence, Zimbabwe has lagged behind and needs to catch up with its peers” (Mangudya, P: 6-7, 2017).
Reactions to drought:
“In 2016, food imports (maize and wheat), however, surged owing to the El Nino induced drought that destroyed crops in the Southern African region, including Zimbabwe. Continued reliance on imports of finished goods is unsustainable as it undermines current efforts to resuscitate domestic industrial production, leading to significant trade and current account deficits” (Mangudya, P: 15, 2017).
Other key development:
“Driven by merchandise trade developments, the current account deficit is estimated to have narrowed down by about 15.5%, from a deficit of US$1,519.4 million in 2015, to a deficit of US$1,283.9 million in 2016, partly on account of the projected decline in the import bill. Remittances, which are also a major source of import financing declined by 17.9% in 2016, from US$1,917.7 million received in 2015 to US$1,574.0 million in 2016. Of the total amount received in 2016, US$779.0 million reflects remittances from the Diaspora while remittances from International Organizations (NGOs) amounted to US$795.0 million” (Mangudya, P: 16, 2017).
Problematic government loans:
“Reflecting developments on both the current and capital account, the overall balance of payments position is estimated to have deteriorated from a deficit of US$25.8 million in 2015 to a deficit of US$186.4 million in 2016. This phenomenon reflects an unsustainable economic situation of funding capital projects using loans as opposed to equity. The danger with this scenario is that debt would become unsustainable as exports are mortgaged towards debt repayments” (Mangudya, P: 19-20, 2017).
“The fact that the 14.4% of the country’s foreign receipts handled by RBZ for redistribution into the market seems to have more impact in the economy is a sign of market failure. The Bank shall quickly move to redress this market failure through measures that compel banks to adhere to the import priority list and to mitigate against institutional indiscipline such as the use of more foreign exchange for personal card and DSTV transactions ahead of raw materials to produce cooking oil, for example. Financial institutions should do some soul searching and rethink on how they add value to the economy under the New Normal” (Mangudya, P: 67, 2017).
Bond- Notes introduction:
“The Bank is encouraged by the manner in which the nation embraced bond notes. The Bank has to date issued $94 million of bond notes into the market against an aggregate value of the export incentive of $107 million. Whilst the circulation of the bond notes represented by levels of deposits and withdrawals is also encouraging, the Bank is putting in place a redistributable measure that mitigates against skewed concentration of bond notes within the banking sector by limiting the maximum amount of bond notes that each bank should hold at any given point in time in relation to its level and type of transactions. This measure is necessary to ensure that bonds notes are distributed proportionately according to the customer base or customer profile of each banking institution” (…) “The Bank is directing financial institutions to strictly observe the policy to deposit bond notes into the US$ accounts without requesting the banking public to differentiate between bond notes and US$ cash. This measure is essential to ensure that bond notes continue to trade at parity with the US$ and to reflect the fact that bond notes are supported by the US$200 million offshore facility to support the demand for foreign exchange attributable to bond notes” (Mangudya, P: 67-68, 2017).
When you see this numbers alone, there would be more meat in the report that says lots of the downfalls of the economy. The Governor said the fiscal issues and debt, together with the lacking of imports and exports, the short and less infused funds. With that in mind, instead of pounding on the troubled economy, we should rather enjoy a moment of explanation of why albatross is so dire:
“something or someone you want to be free from because that thing or person is causing you problems” (Cambridge Dictionary) and this one too: “a continuing problem that makes it difficult or impossible to do or achieve something” (Merriam Webster Dictionary). So the Albatross for the Zanu-PF is the economy, even as they eat of it and deplete it. However, the turbulence and insecurity isn’t over as the trust in the Bond-Notes or the other factors as the New Normal isn’t giving. Peace.
Dr. J.P. Mangudya – ‘“Stimulating Economic Growth and Bolstering Confidence”’ – Monetary Policy Statement, Reserve Bank of Zimbabwe (RBZ)