The Confederation of Zimbabwe Industries (CZI) has pleaded with the International Monetary Fund (IMF) to release cheap loans for the capital starved private sector to recapitalise and replace aging equipment.
The IMF team, currently in Zimbabwe to conduct the second review under the 15-month Staff Monitored Program (SMP), met with CZI vice-president Tracy Mutaviri on September 2 to discuss the private sector’s view of the country’s economic performance.
“The major challenge that the economy is facing and an area where the IMF could come in is to do with finance, that is access to affordable finance, which is affecting competitiveness,” reads part of the minutes prepared by CZI.
The industry body noted that while Zimbabwe’s debt overhang was a key constraint to unlocking affordable money, it appealed to the IMF to separate national and private sector issues by allowing industry access to finance from the International Finance Corporation (IFC).
The IFC made its first visit to Zimbabwe since 2001 in June this year, leading to hopes that the country could access long-term, inexpensive funding for its undercapitalised firms. Failure to access concessional funding has resulted in local companies struggling to retool, becoming uncompetitive on the global market.
“The economy needs funding in order to grow and then be able to pay debt and arrears yet the institution is not willing to lend the requisite amounts, and this begs the question as to whether or not the IMF really is willing to help,” read the minutes.
Saddled with a $9 billion external debt, Zimbabwe has not received financial support from the IMF, World Bank and African Development Bank since 1999 due to its failure to pay arrears and policy differences between President Robert Mugabe and the West.
The southern African country’s economy is slowing down due to lack of foreign investment, electricity shortages and expensive loans. Cheaper imports are also damaging local industry, forcing firms to close.
The IMF team however, said Zimbabwe needs to finalise its debt strategy in order to clear outstanding arrears to pave way for access to finance.
Generally the rules governing institutions is such that when a member country has arrears with any other institution, the rules do not allow them to lend hence government needs to clear arrears first.
“(The IMF team) expressed that the IFC is ready to do business with the private sector in Zimbabwe and the country needs to prepare with a pipeline of projects that can be funded by the institution. What’s needed is the finalisation of the debt strategy and clearance of arrears of the public sector,” read the CZI minutes.
Some of the issues discussed at the meeting involved the setting up of special economic zones, the impact of industry protectionism and sanctions among others.-The Source