Kundhavi Kadiresan, the World Bank country director for Malawi, Zambia and Zimbabwe lauded the country’s economic recovery driven by mining and agriculture but said it was susceptible to shocks and problems that would impede growth.
“The constraints are enormous…the demand and supply when you look at the energy sector is going to have a huge deficit. “Therefore, unless government really starts looking at building the infrastructure…energy, roads, water supply, ICT, Zimbabwe, to really be able to recover fully and develop to its full potential, still seems far off,” Kadiresan said.
She said the growth in mining was driven by favourable prices on the world markets while the rebound in agriculture could be attributed to good climate and favourable food prices.
However, she said once prices begin to fall, the sectors’ growth would be constrained. “History has shown that these commodity prices can be quite high and at the same time can come down quickly and we do not know how the global economy is going to be.
“If it slows down it can also bring down demand for the mining products and also for food,” Kadiresan said. She said although Zimbabwe had seen recovery in the agricultural sector, it was still limited in terms of unleashing its full potential unless it resolves some of the land related issues.
“As a result of all these constraints, the issue of land tenure, the issue of energy, the issue relating to roads and railways, and the cost of doing business in Zimbabwe continues to be very high.
“That’s one of the reasons why one feels that the investment climate for foreign investment to come into the country is still not very conducive,” she said.
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Kadiresan, who met Finance ministry officials, among others, during her visit, said experts were working closely with government and non-governmental organisations in terms of putting the foundation ahead of the normalisation of relations with the World Bank once the country cleared its outstanding arrears.
The bank was providing technical assistance to Zimbabwe and would open lines of credit if the country cleared its arrears. Zimbabwe has a large debt overhang. At the end of last year, the external debt was estimated at US$8,8 billion. Of that amount close to US$6 billion are in arrears. Arrears to the World Bank and other multilaterals are almost US$2 billion.
“For us to come back and have normal activities to be re-established, we need to address the arrears situation for which we would first make sure that the country has established a record of good macroeconomic policy,” Kadiresan said.
“Unless we have that framework in place, it will be hard for us to really start any negotiations on the arrears. We are looking at in terms of implementing medium term structural reform programme that is endorsed by the World Bank and then hopefully as part of the satisfactory performance on a stabilisation programme monitored by the IMF.
IMF and government are in discussion over a Staff Monitored Programme. Kadiresan said the World Bank is hopeful an agreement would be reached soon. She said there were three critical areas—ghost workers, indigenisation and liquidity of banks—which are holding back an agreement.
Kadiresan was on her second visit to the country since she assumed the post of director for Malawi, Zambia and Zimbabwe in June. Her first visit in June was a familiarisation mission.
