HomeBusinessUncertainty over poll could derail economic growth — IMF

Uncertainty over poll could derail economic growth — IMF

In a recently published Article IV report, the Bretton Woods institution said the country’s medium term outlook was clouded by political uncertainties.

 

“An unchanged policies scenario projects a gradual decline of real gross domestic product (GDP) growth rates to about 3%, because investment most likely would remain subdued on account of significant structural impediments, the acceleration of indigenisation in mining and lingering uncertainties about ownership requirements in other sectors,” said the IMF.

 

Analysts said policy inconsistency and incessant conflicts over key aspects of the Global Political Agreement (GPA) are negatively affecting economic growth and investment prospects.

 

“Some officials thought restrictive measures imposed on some Zimbabwean officials and their companies by several countries hindered the recovery and constituted the major obstacle to medium term growth,” said the IMF in its report.

 

The report said inefficient expenditure composition; rising vulnerabilities in the financial system and the recent announcement of fast-track indigenisation of the mining sector would be a drag on the recovery. This would cause growth to decelerate to 5,5% this year, it said.

 

Economic planning authorities anticipate a growth rate of 9,3% spurred by favorable performance in the agricultural, mining, tourism and manufacturing sectors.

However, the country has not witnessed substantial foreign direct investment (FDI) inflows needed to resuscitate the four sectors.

 

The IMF noted the importance of the mining sector, which is contributing 20% to the country’s GDP but urged restraint in the indigenisation overtures being made as higher commodity prices and increased diamond exports could underpin massive growth in Zimbabwe.

 

“Empowerment of indigenous Zimbabweans through indigenisation of business remains a key objective of government although reasonable flexibility is expected in its implementation, particularly in the mining sector,” said the institution.

 

The IMF said that FDI in mining and portfolio investment are projected to decline in 2011 should policies fail to change adding that these inflows would remain at a projected US$100 million up to the year 2016.

 

It also recommended improving governance of public enterprises active in the diamond sector, which would be complemented by IMF and World Bank technical assistance.

 

 

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