‘Unclear policies hinder growth’

Business
POLICY and political uncertainty will continue to hold back investment and constrain decision-making throughout 2013 and probably for most of next year, a leading economist has said.

POLICY and political uncertainty will continue to hold back investment and constrain decision-making throughout 2013 and probably for most of next year, a leading economist has said.

BY OUR STAFF

Zimbabwe’s much-anticipated upward economic growth trajectory since dollarisation in 2009 has been blighted by policy inconsistency, fuelled by bickering parties in the inclusive government.

University of Zimbabwe Business School head, Tony Hawkins told an Alpha Media Strategic meeting recently that meaningful socio-political change in the sense of a more competent and economically-oriented administration, wi-th a focus on the population as a whole, was the key to a better future performance.

He said Zimbabwe had a huge trade gap, pegged at US$3 billion, which would remain unsustainably high despite the expected slowdown in import growth.

“The trade gap is huge because Zimbabwe is over-consuming 90% of GDP [Gross Domestic Product], so that demand spills over into imports. It has become a high-cost economy, partly because wages are rising faster than productivity,” said Hawkins.

“To finance the trade gap, Zimbabwe is unsustainably reliant on foreign capital, deeply ironic, given the government’s indigenisation policy.”

‘Rate of borrowing must slow down’

Hawkins said in the last two years, capital inflows had averaged US$1,4 billion a year, more than US$2 billion when arrears are included, with the bulk of this being borrowed money.

Less than US$250 million a year is in the form of offshore investment.

“And this is by an already over-borrowed country. In the future, the rate of borrowing will have to slow, while a growing proportion of new borrowing will have to be used to service existing loans,” the business professor said.

Zimbabwe’s foreign debt stands at an estimated 116% of GDP, over half of which is in arrears.

Hawkins said a combination of a sluggish global economy, the growing impact of constraints in the form of high debt, an unfavourable balance of payments position and excessive consumption without any savings pointed towards a flattish year for the economy in 2013.