Mr Beddies

Zimbabwe is intensifying re-engagement with international financial institutions with a view to finding solutions to a debt overhang, which has for years prevented the country from benefiting from its membership to multilateral lenders. As part of mending relations, the International Monetary Fund (IMF) last week concluded a second review of the Staff Monitored Programme giving an indication of the country’s economic performance. To get more on this and Zimbabwe’s position in the IMF, our Business Reporter Conrad Mwanawashe (CM) interviewed IMF Resident Representative, Mr Christian Beddies (CB).

Read on. . .

CM: The International Monetary Fund mission has just completed a second review of its Staff Monitored Programme. This review gives the IMF access to Zimbabwe’s economic data and performance and provides the IMF with a bird’s eye-view of the economy. Kindly give us your overview of the economy.

CB: Economic difficulties have intensified this year. Growth has slowed more than anticipated and we expect it to remain weak in 2015. Despite the favourable impact of lower oil prices, the external position remains precarious and the country in debt distress.

CM: In the Mid-Term Fiscal Policy Review Statement presented to Parliament on Thursday, August 30 2015, the Minister of Finance and Economic Development revised to 1,5 percent GDP growth forecast. What is the IMF’s forecast of Zimbabwe’s GDP growth for 2015?

CB: The revision is justified given the challenging economic environment — drought, low commodity prices, an uncompetitive manufacturing sector — and in line with the authorities forecast presented in the mid-term fiscal review.

CM: In the final statement on the conclusion of the second review of the SMP, the IMF noted that economic difficulties intensified this year. Growth has slowed more than anticipated and is expected to remain weak in 2015. Despite the favourable impact of lower oil prices, the external position remains precarious and the country in debt distress. From the IMF perspective, is the 1,5 percent growth forecast by the Government achievable?

CB: We believe that the growth of 1,5 percent can be achieved.

CM: In light of the prevailing circumstances and efforts by the Government to improve the business environment and engaging multilateral and bilateral creditors, what are the IMF’s GDP forecasts for 2016?

CB: Around 2.5 percent but this is very preliminary.

CM: The IMF has experience arising from having worked with the institution’s member countries. What are the threats to Zimbabwe’s economic growth that the IMF has identified?

CB: Drought, for the 2015/16 farming season indications are that the rains will be normal to below normal, low commodity prices, the volatility of the strong dollar, low water levels and the implication for electricity generation at Kariba.

CM: Zimbabwe is currently seized with improving business competitiveness. What are the issues that the IMF identifies as threats to competitiveness?

CB: Let’s ask what we can do to improve competitiveness. Reducing the cost of doing business, enhancing the ease of doing business, attracting investment in productive sectors and infrastructure are key measures that are on the Government’s agenda and would help increase competitiveness.

CM: In 2009, Zimbabwe adopted the use of a multi-currency system following a hyper-inflationary period. Kindly comment on the positives and negatives of using a multi-currency system in Zimbabwe?

CB: I would call it opportunities and challenges. Opportunities — stability and confidence;

Challenges — the volatility of currencies for Zimbabwe’s trading partners, most importantly the rand which makes South African imports cheaper and Zimbabwe’s exports more expensive.

CM: How has this impacted on local business competitiveness?

CB: The situation has been exacerbated by the fact that the cost of doing business in Zimbabwe is very high.

CM: How has using the multi-currency regime impacted on economic growth?

CB: Positively, given stability and the increase in confidence.

CM: Zimbabwe currently has no financial relationship with the IMF and other international financial institutions. How would you rate the country’s prospects of receiving support from the IFIs?

CB: This is too early to tell and depends on a number of factors, including the outcome of the Lima meeting.

CM: Now that Zimbabwe has successfully met the quantitative and structural targets for June, what next?

CB: The third and final review under the SMP will be conducted in the first quarter of 2016 to review the December 2015 targets.

CM: The SMP will expire in December 2015, what comes next?

CB: The ultimate goal is for Zimbabwe to be able to normalise relations with its creditors. This is what the IFI’s together with the Government are working on. The meeting in Lima is an important milestone in this regard.

CM: Zimbabwe has intensified efforts toward re-engagement with the international financial community and has developed a proposal for a strategy for resolving its external arrears with international financial institutions (IFIs), for which they will seek support from creditors at a dedicated stakeholders meeting (to be held on the sidelines of this year’s Annual Meetings of the IMF and the World Bank in Lima, Peru). Kindly comment on the Lima meetings between Zimbabwe and the IFIs?

CB: As advised at the round-table discussion on Thursday, the authorities will meet their creditors in Lima and present the options to clear the arrears to the IFIs and seek support from creditors for their strategy to clear arrears to the IFIs.

CM: In your own words, would you say Zimbabwe has traction among the IFIs?

CB: I would say that the developments over the past six months or so have clearly shown the authorities’ commitment and a resolve toward re-engagement and therefore the answer is yes, there is traction with the IFI’s.