Reforms to tame exchange market rates, inflationary pressures: Minister

FOREIGN exchange market rates and inflationary pressures are expected to ease as Government continues implementing macro-fiscal stabilisation measures that will see the economy rebounding next year and beyond on the back of ongoing reforms. 

Finance and Economic Development Minister Professor Mthuli Ncube said this in the latest reform progress for the month of October released yesterday.

He said implementation of reforms outlined in the Transitional Stabilisation programme was on course, with notable milestones on fiscal consolidation, monetary policy restoration, liberalisation of the foreign exchange market, structural and governance reforms, re-engagement, investment promotion and support for the productive sectors. 

 “Continued implementation of macro-fiscal stabilisation measures are expected to stabilise the foreign exchange market and inflationary pressures.

“The current account, for the first time since the adoption of the multi-currency regime in 2009, registered a surplus of US$196 million in the first quarter of 2019. 

“This was due to the impact of import management measures under implementation, which prioritise capital and production inputs as opposed to non-essential finished goods,” said Prof Ncube. 

Zimbabwe’s economy has been on a downward trend for close to two decades due to the adverse effects of the illegal sanctions imposed on the country by the West.

Prof Ncube said Government has signed off a Staff Monitored Programme with the International Monetary Fund covering the period May 15 this year to March 2020 with Zimbabwe having so far met four out of the six quantitative targets of the programme.

“The monitoring of the SMP will be through three reviews – end June 2019, end September 2019, and end December 2019 based on 6 quantitative benchmarks and 9 structural benchmarks.

“As at end June 2019, Government met four out of six quantitative targets and missed the target on Floor on stock of international reserves and ceiling on credit to the non-financial public sector from the Reserve Bank of Zimbabwe,” he said. 

The target on reserves, Prof Ncube said, was missed by US$507 million reflecting excessive borrowing necessitated by imports of critical goods and services such as fuel, electricity, drugs, and wheat, among others.

The SMP seeks to assist Zimbabwe implement key reforms as outlined in the Transitional Stabilisation Programme (TSP) which aims at allowing the country to build a track record of sound economic policies as it seeks re-engagement with the international community.

Last June, Government had one structural benchmark relating to ‘Adopting regulations implementing the Public Financial Management (PFM) Act including ensuring that all expenditure commitments are recorded in IFMIS’. 

The regulations were gazetted on August 14, 2019 and hence the target was met.

“Successful implementation of the SMP, in conjunction with key reforms in the TSP, will enhance development partners and creditors support. 

The strong support from creditors will be crucial for the rapid implementation of a comprehensive arrears clearance and debt relief programme,” said Prof Ncube.

He said a sound infrastructure system was a prerequisite for achieving economic growth and development through enabling other sectors of the economy to function efficiently and effectively. 

The Finance Minister noted that Zimbabwe’s infrastructure has gone for decades without meaningful maintenance and this was creating a huge gap. 

In order to close the gap, Prof Ncube said Government has embarked on a number of infrastructure projects in various sectors and many were at various stages of implementation.

On the Ease of Doing Business Reforms, he said:

“Government, continues to pursue Ease of Doing Business Reforms as part of broad measures on enhancing the country`s investment environment and external competitiveness. 

“The reforms target administrative and other legislative bottlenecks under various statutes.”

Prof Ncube said with regards to administrative procedures, timelines and costs have been reviewed and streamlined to facilitate the Ease of Doing Business.  The 2019 World Bank Doing Business Report has identified Zimbabwe as one of the top 20 on the world and top five in Africa doing business reformers. 

The Finance Minister said Zimbabwe reiterates its commitment to ensuring that all foreign investments are safe and will honour its obligations under the various Bilateral Investment Promotion and Protection Agreements (BIPPAs). 

So far, Zimbabwe has signed and ratified 12 Bippas with Denmark, Germany, Switzerland, Netherlands, China, India, Russia, Kuwait, Iran, South Africa, Yugoslavia and the OPEC Fund. 

Signed BIPPAs that await ratification were totalling 20, while a further 23 BIPPAs were being negotiated.

“The establishment of a One Stop Shop Investment Centre has been receiving urgent attention under the 100 Day Rapid Results Plan and as part of the priority investment reforms. 

“The Zimbabwe Investment Authority is being merged with the Special Economic Zones and the Joint Venture Unit to establish a One Stop Shop Investment Centre,” said Prof Ncube.