Zimbabwe’s economic growth will continue to be weighed down by lack of policy clarity despite government’s recent moves to tone down its empowerment laws, the World Bank has warned.
President Robert Mugabe’s government has been on a charm offensive as it tries to lure foreign investors and kick-start an economy that has been on a decline for some time.
Some of the reforms include attempts to make the controversial Indigenisation and Empowerment Act investor friendly. The law compels foreign investors to cede 51 percent of their shareholding to locals.
According to measures introduced in December, foreign investors now have more time to comply with the law and the legislation would no longer be applied in a blanket fashion.
But the World Bank in a report titled Zimbabwe Economic Update: Changing Growth Patterns says the government still has to do more to restore confidence in the economy.
“The Indigenisation and Economic Empowerment Act continues to be a challenging hurdle for private investors, while authorities have recently made an attempt to clarify the law,” reads part of the report. It added that Zimbabwe had vast potential for inclusive economic growth if correct policies were implemented.
The World Bank said the country’s economic outlook was subdued because of the impact of El Nino related weather conditions. An El Nino induced drought is set to reduce Zimbabwe’s agriculture deress agricultural output but economic growth is expected to remain at 2-3 % in 2017-18.
The World Bank said attempts by Zimbabwe to clear its foreign debt could open doors for fresh funding to boost the faltering economy. “Clearing external debt arrears is important to Zimbabwe’s medium-term growth trajectory,” the Bretton Woods institution said.
“The total public and publicly guaranteed external debt was estimated to be $7.1 billion (51 percent of gross domestic product) as at September 2015, with external arrears occupying a large share at $5.6 billion (79 percent of total external debt),”.
Zimbabwe has committed itself to clearing some arrears to multilateral institutions in 2016 using its own resources and loans. “If successful, this strategy will go a long way to lifting Zimbabwe’s medium-term growth outlook,” the World Bank said.
Zimbabwe is working on a cocktail of economic strategies geared at clearing its combined $1,8 billion in arrears owed to the African Development Bank (AfDB), International Monetary Fund (IMF) and the World Bank as part of the debt clearance strategy approved last year.
Zimbabwe has not received financial support from the IMF, World Bank and AfDB since 1999 due to its failure to pay arrears and policy differences between Mugabe and the West.
Meanwhile, the World Bank expressed concern over Zimbabwe’s failure to fund its health sector as it relied heavily on donors.
“Zimbabwe currently receives about $12 per capita in annual donor support for health expenditures, less than half of the allocation for Zambia and lower than the allocations for Tanzania, Mozambique and Malawi,” added the report.
“Two-thirds of donor financing is devoted to HIV/AIDS, tuberculosis and malaria programmes. With the exception of HIV/AIDS programming, donor funding exceeds government funding in all non-wage expenditure categories.”
Zimbabwe’s economy weighed down by policies
Author: Janet Shoko
Source: The Africa Report