Zimbabwe lockdown: chance for economic reforms

THE Covid-19 pandemic provides Zimbabwe with an opportunity to implement political and economic reforms to set itself on a growth trajectory, a local research firm GrowthPoint Capital has said.

In its Q1 2020 Economic Report, the firm said without any credible reforms, the country faced downside risks emanating from inflationary pressures, weakening currency, lack of external financing support, and the possibility of further climatic shocks.

GrowthPoint Capital said the Covid-19 pandemic had already worsened Zimbabwe`s dire economic situation.

“Heading into the Q2:2020, Zimbabwe faces unprecedented headwinds,” the firm said.

“The first and immediate challenge is to adequately address the issue of the Covid-19 pandemic and ensure infection rates are kept low, as the country does not have the capacity to cope with excessive infection rates.

“For example, the country only has 30 hospital beds per 10 000 people according to the World Health Organisation.

“With major foreign currency earning industries in a state of flux because of the pandemic, the rest of the year is likely to be difficult to navigate,”

At a time accessing new lines of credit remains highly unlikely due to strained relations with global financiers, GrowthPoint Capital pointed out that the Reserve Bank of Zimbabwe (RBZ) was likely to continue printing money.

“Given this reality, there is a high risk that the RBZ will continue printing money, as it seems to have exhausted most available external borrowing sources, while domestic financing needs to continue to increase,”the firm said.

“This will potentially spur an undesirable growth in domestic debt. Coupled with existing external arrears, it is apparent that Zimbabwe is currently in debt distress, further limiting the country`s access to much-needed external loans.”

The research firm said Delta Beverages, that has long been regarded as Zimbabwe’s bellwether stock, had recorded a plunge in volumes, which was a reflection of the state of the entire economy.

A trading update for the quarter ending March 31, saw the company recording a 30% plunge in volumes. – The Standard