31 January 2014

Zimbabwe: 'Reforms Key to Turning Around Economy'

ACTING Reserve Bank of Zimbabwe Governor Charity Dhliwayo held out hope for the economy this week when she presented her monetary policy, but analysts feel more reforms in respect of policy and governance are required to turn around the country's economic fortunes.

The country's high commodity dependence, has conspired with huge import absorption to drain the banking sector of the liquidity largely realised from export earnings, diaspora earnings' offshore credit facilities, FDI and portfolio investment inflows, Dhliwayo said.

"Despite these attendant challenges, I remain optimistic that economic prospects for Zimbabwe will not disappoint, provided we decisively and holistically implement all the ingredients as embodied in Zim-Asset," she said.

However, economist Takunda Mugaga argued there was no reason for such optimism.

"It's interesting, but you have to remember she is in acting capacity and she needs that job so her optimisim is to make sure she is seen to be fit for the job because she is wearing an acting jacket," Mugaga said.

"The challenge is for one to weigh between her interest for the job and reality. She can't be pessimistic when she needs the job."

On the other hand, he said, a positive perception is key in banking particularly when ones needs to shrug off pessimism as in the case of Zimbabwe.

"She is trying to bring stability into a sector that is under pressure so the best way is to cast away pessimism. I believe in her more than Gono (immediate past RBZ Governor Gideon Gono); clearly she is a better banker than Gono and at times it's an issue of confidence."

"I don't know if the economy will change because of what she has said, but I think she has capacity to build that confidence we need because she has no background in active politics and when she says something markets won't say Zanu PF said it which is exactly what is needed at times."

Dhliwayo's statements come on the back of acute liquidity challenges, low diaspora remittances and poor export performance. A cocktail of economic halenges have seen companies closing and thousands of Zimbabweans losing their jobs.

In her statement, Dhliwayo said the country continues to face persistent liquidity challenges largely on account of a poor export performance which compares unfavourably with growing import dependence.

She said the liquidity situation has been further amplified by delays in the repatriation of proceeds by the country's exporters who have overdue export receipts as at 31 December 2013 stood at US$318 million.

Dhliwayo said the country's external sector position remains precarious on the back of uncompetitive exports and the absorption of disproportionally huge imports.

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