Zim's economic crisis reach a breaking point
FORMER finance minister and MDCAlliance vice-president Tendai Biti says Zimbabwe, gripped by the twin crises of an imploding economy and the Covid-19 pandemic that have seen the International Monetary Fund (IMF) forecast a 7,4% decline in gross domestic product, requires US$1 billion to rescue its industries.
The country, hamstrung by rising inflation which stood at 785,55% in April, rolled out a ZW$18 billion worth (US$720 million at the bank rate of US$1:ZW$25) stimulus package to revive a fragile economy that shrank by 8,3% last year.
At the time the package was announced at the beginning of May, the facility amounted to about US$430 million at parallel market rates, but is now equivalent to US$225 million at parallel rates of US$1:ZW$80 because of the galloping inflation. Industrialists cautioned that the measly package would not extricate distressed industries, buffeted by severe headwinds of prolonged power cuts and job losses.
Biti, who served as Finance minister during the inclusive government era that was characterised by relative stability, told the Zimbabwe Independent in a recent interview that with government coffers running dry, mobilising ZW$18 billion to bail out industries would be a mammoth task.
Biti’s remarks come at a time Finance minister Mthuli Ncube has pleaded for a US$200 million rescue package from the IMF and World Bank (WB) in the face of Covid-19 that will see the global economy shrinking by 3,2% as the world grapples with the pandemic. Ncube wrote to the Bretton Woods institutions in April, cautioning that Zimbabwe’s economy would plunge into the abyss if the rescue package was not made available.
“It is a fictitious package because government does not have ZW$18 billion. As a matter of fact, since the lockdown on March 30, this government has hardly collected any revenue because companies have been shut down. So that ZW$18 billion is hot air. So you cannot distribute hot air. You are not God,” Biti said.
“So, it’s pie in the sky. We do need a package, a social package, to flatten the poverty curve. In my submission, this government, by hook and by crook, must find US$500 million which it should channel towards social safety nets. This would entail the provision of food to the people, provision of cash handouts to people during the period of the pandemic.”
The former Treasury boss said an additional US$500 million would be required to revive Zimbabwe’s haemorrhaging companies, with 88% of them struggling to stay afloat, according to a survey by the Confederation of Zimbabwe Industries (CZI) conducted in April.
He said: “We also need a business intervention -- a fiscal bailout. I would argue that at least another US$500 million. So all in all you need US$1 billion; US$500 million to flatten the poverty curve and US$500 million to flatten the business curve. In essence, you want to deal with three issues, namely Covid-19, the disease, poverty and you want to deal with the economy by stimulating productivity.
“This money must be part of the transition bailout because we are now transitioning out of Covid-19. We have to be alive to the fact that Covid-19 is going to be with us, just like the flu virus is with us. It is not going away. So we must find ways of exiting in order to prevent the rise of second spikes of the virus. How do we build resilience going forward? Building resilience requires a functional and sustainable state.”
With Zimbabwe managing to secure only US$7 million from the World Bank when a country like Rwanda was allocated more than US$300 million to mitigate the catastrophic effects of the pandemic, Biti said it was imperative for President Emmerson Mnangagwa’s administration to cultivate “credibility, which is key in regaining the confidence of multilateral lenders.
“Zimbabwe got US$7 million from the WB; other countries are getting US$450 million. So it’s a question of credibility. Mnangagwa does not have credibility. That is the problem,” Biti said.
“We have made calls for humanitarian assistance for our country, but that assistance must not go through the government of Zimbabwe because it steals.”
Zimbabwe has so far recorded four deaths from the pandemic, with 391 positive cases as of Wednesday this week, as the country gradually eases the lockdown which began on March 30. Industries have begun applying for funding under the ZW$18 billion stimulus package through their respective banks, with ZW$2,5 billion earmarked to finance the winter wheat programme and selected productive sectors of the economy. The loan facility will attract less than 20% interest.