Govt reveals major areas of concern, seeks solutions

Government, through the Ministry of Finance and Economic Development, is still looking for relevant interventions for reinstating the country’s economy on a sustainable growth trajectory.

Although the country has achieved growth in the last couple of years and is forecast to grow by 5,3 percent this year, concerns remain that the growth is fragile and not sustainable.

This is amid continued threats to growth stemming from higher levels of inflation, currency instability, and limited external budget support in particular for infrastructure development.

Resource mobilisation and financing have been a major challenge as the country struggles to reschedule and restructure its debt obligations that have been in arrears for years.

The country’s total debt stood at US$18 billion as at the end of 2022, according to the 2022 Annual Public Debt Bulletin released by the Ministry of Finance and Economic Development.

With limited access to cheap funding from global lenders, the country, which is also under economic embargoes, has resorted to use of own resources to fund key projects, however, with disastrous consequences in form of price and exchange rate instability.

Inflation has for years remained in double and triple digits while the exchange rate has remained distorted with the local currency having multiple exchange rates characterised by a parallel market exchange rate that is at a huge premium to the official exchange rate.

Economic commentators such as Professor Gift Mugano have long argued and warned against Government funding infrastructure projects using budget revenues.

Commenting on the 2022 National Budget in November last year, through his Twitter handle, Prof Mugano said: “A cash budget of $1.1 trillion for capital expenditure mainly for roads, dams and other infrastructure projects poses a serious threat to the economy mainly through exchange rate spikes and inflation. The budget has been the main driver of inflation in Zimbabwe.

“Building on this experience, it is clear that there is causal relationship between the size of the budget and inflation developments,” said Prof Mugano.

Government seems to have taken such criticism on board and will use this year’s Zimbabwe Economic Development Conference (ZEDCON 2023) as an opportunity to explore ways of ensuring effective utilisation of domestic and external resources as well as to interrogate emerging and innovative sources of finance, including international financial markets and digital financing.

This week the Ministry of Finance and Economic Development called for abstracts for ZEDCON 2023 that will be used to discuss, among other things, exchange rate, inflation and interest rate developments and their impact on development financing.

“It is expected that at the end of the conference, policy recommendations will be made on strengthening Zimbabwe’s financing system to build forward better within the framework of the National Development Strategy 1, the SDGs and the Agenda 2063,” reads part of the statement released by the Ministry.

Another key area is that of leveraging the informal sector development including sustainable models for formalisation as well as boosting productivity in the informal sector.

In terms of exchange rate, submissions are also expected on the role of fiscal policy in determining exchange rate adjustment and inflation.

This comes as Government is playing a key role in the exchange rate space as a supplier of foreign currency on the auction system.

“In view of the above, we welcome submissions of original research, both theoretical and empirical contributions related to domestic and international resource mobilisation, informal sector and sustainable development, role of the Private Sector in financing development as well as inflation rate and exchange rate dynamics,” reads part of the statement released by the Ministry.

The Ministry is looking at getting submissions in terms of Resource Mobilisation and Financing of NDS1, leveraging the informal sector for development, enhancing the role of the private sector as well as submissions in terms of inflation and exchange rate dynamics.

Researchers, academia, development partners, corporates, economic think tanks and representative organisations, among others are all eligible to submit paper abstracts for the ZEDCON 2023 conference to take place in September.

Researchers are also expected to present on evaluation of Value for Money Policy. This policy was introduced by Government to restore market discipline and deal with unethical behaviour exhibited by suppliers and contractors who had been manipulating the foreign exchange market.

This policy also saw Treasury and PRAZ developing a national price Index to guide all public sector institutions on the price ceilings in the various procurement categories.

Critics say this policy is not sustainable as it has also resulted in delayed or non-payment of suppliers.-ebusinessweekly