ZIMBABWE faces a bleak 2016 as it has a bad external environment in addition to being constrained by the cash budgeting system, a British diplomat has warned.
BY TATIRA ZWINOIRA
The absence of budgetary support and use of the multicurrency regime means that Zimbabwe “has to eat what it has killed” and it cannot resort to the printer to finance projects or borrow from institutions due to failure to clear its debts.
British Ambassador to Zimbabwe Catriona Laing said the economic prospects for the country with the current policies in place offered a very bleak investment opportunity to the international community.
“Short term, it [economic outlook] is obviously very bad. It is particularly challenging for Zimbabwe because the external environment is so difficult at the moment with the drought. We are facing probably another tough year coming, the exchange rate and the fact that commodity prices are falling,” she said at a debate on the country’s economic prospects last week.
“Even if Zimbabwe was in a much better position, the external environment would remain challenging, so short term it is very bleak.”
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Laing said Zimbabwe had to clear its arrears to international stakeholders as it was “absolutely” critical to the economy as the move would encourage investment.
“Clearing those arrears is absolutely critical because Zimbabwe is running a cash budget, I have not seen an economy quite in this situation. Basically, it can only spend what it raises in revenue and it does not really have access to loans and that is not sustainable,” Laing said.
The country’s public and publicly-guaranteed debt stands at $8,4 billion, and has arrears of $1,8 billion to the International Monetary Fund (IMF), World Bank and the African Development Bank.
Reserve Bank governor John Mangudya is set to visit three European capitals to seek support for the country’s debt strategy ahead of the IMF/World Bank annual meetings in Lima, Peru, next month. The strategy will be tabled before the preferred status creditors.
Britain along with the United States are the biggest contributors in aid to the country which was estimated to be a collective total of $700 million by the end of last year.
Zimbabwe and the United Kingdom have had a thorny relationship since the land reform programme that led to targeted sanctions being put on the country with the government blaming the sanctions for the ailing economy.
However, Laing said the sanctions were never on the economy adding that they are providing quite substantial amounts of aid which has supported different sectors in the economy.
She said: “The health and education systems here, frankly, are supported by the international community. If we did walk away, they would collapse and you would see it very quickly.”
Laing said that Britain never stopped engaging with Zimbabweand was speaking on behalf of the European Union and bilateral partner as the UK.
The British Government is set to engage government at a policy level to try and flesh out a strategy to improve the investment climate.