World Bank pledges funds to stimulate Zim economy

THE World Bank has commended Zimbabwe for taking some difficult but necessary measures aimed at transforming the economy, pledging to provide financing to stimulate growth and reduce poverty.

This was said by the country manager for the World Bank in Zimbabwe, Ms Eneida Fernandes, on Monday at the highly successful side event on the country’s arrears clearance and debt resolution process during the ongoing African Development Bank annual meetings.

“The World Bank is engaged in this process (Structured Dialogue) to fully re-engage in Zimbabwe and provide the Government with the necessary concessional financing to help accelerate growth and poverty reduction, in line with the World Bank’s vision of a world free of poverty on a liveable planet,” said Ms Fernandes.

“However, we would like to reinforce that sufficient progress under each of the three pillars of the Structured Dialogue Platform for arrears clearance and debt restructuring is critical to realise this.

“We, therefore, press on Zimbabwe’s senior leadership to continue and reinforce their commitment to each of the three pillars, to ensure their prompt success.”

The three pillars under the platform are Economic Growth and Stability Reforms, Governance Reforms and Land Tenure Reforms, Compensation of Former Farm Owners, and Resolution of BIPPAs.

Under the Second Republic, Zimbabwe is working to engage and re-engage everyone and every institution across the world to establish and mend relations.

The re-engagement drive is bearing fruit, with many countries and institutions warming up to President Mnangagwa’s initiative.

Ms Fernandes added that the World Bank is committed to supporting the Government in its initiatives and will continue to assist Zimbabwe with the reforms agreed through the Structured Dialogue process.

“We remain engaged in partnering with the Government, the International Monetary Fund (IMF), the co-chairs of the governance and land pillars, the European Union, Switzerland, and all other bilateral partners.

“We look forward to implementing key reforms, leading to clearing multilateral arrears, and eventually restructuring Zimbabwe’s debt.

“Full reengagement will encourage public and private investments, bolster economic growth and facilitate swift progress towards Zimbabwe’s Vision 2030 to achieve rapid growth and poverty reduction,” she said.

The Government has implemented several reforms under the Economic Reform Matrix, which the Ministry of Finance co-chairs with the World Bank and the IMF.

Key progress as agreed under the economic pillar includes the Government’s decision to terminate all quasi-fiscal activities, along with Treasury’s assumption of responsibility for the Reserve Bank of Zimbabwe’s external liabilities, enabling the RBZ to refocus its efforts exclusively on stabilising monetary and exchange rate policy.

Ms Fernandes added that the Government has ensured lower inflation by introducing the Zimbabwe Gold (ZiG) currency, “which has led to improved monetary and exchange rate stability in Zimbabwe”.

“The Treasury has enhanced tax collection and is currently engaged in a comprehensive programme to further enhance its domestic revenue mobilisation.

“We are also very encouraged and commend the Government on the recent critical reform on April 16, in which it removed official exchange rate controls by repealing a Statutory Instrument that required businesses to use only the official exchange rate,” she said.

However, Ms Fernandes said increased debt servicing costs, along with a rising wage bill, were elevating fiscal burdens, underscoring the need to create fiscal space through domestic revenue mobilisation and expenditure rationalisation to service debt in a non-inflationary manner.

Additional efforts are still necessary to establish a competitive foreign exchange rate regime, she added, which is one of the main actions under the Economic pillar of the debt and arrears process.

Added Ms Fernandes: “It is encouraging to see ongoing discussions with the IMF regarding a Staff-Monitored Programme (SMP). An SMP would provide an effective tool to assist in implementing economic reforms and enhance the credibility of Zimbabwe’s economic programmes to re-anchor macroeconomic stability.

In his remarks at the side event, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, praised global financial institutions and European Ambassadors for the support they give to Zimbabwe.

He said a lot has been covered and the next steps include negotiating with the IMF for an SMP.

“We are expecting a mission from the IMF next week,” he said, adding that hopefully, an SMP would be started in July.

“But (presently) we are looking for sponsors who can give us US$2,5 billion bridge finance,” he said.

The successful implementation of an SMP would create a pathway towards arrears clearance and debt resolution.

Ms Fernandes warned that the economic adjustments required under an ambitious economic reform programme linked to an SMP, while necessary to stabilise the economy, “are not without short-term sacrifices”.

“To create the necessary fiscal space, the Government will have to make difficult decisions on spending cuts and raising domestic taxes. Unfortunately, these costs are often borne disproportionately by the poor.

“We are also happy to see the progress in the implementation of the National Social Registry (ZISO), a robust social registry, that will allow ministries and development partners to coordinate and target assistance to the most vulnerable in society — in key social sectors as education, health, food security, social protection, and climate change,” she said.-herald