Tomorrow, I leave for Sharm el-Sheikh, Egypt, to attend an African Development Bank forum at which Zimbabwe’s arrears clearance and debt resolution issues will be discussed.
As is now known, Zimbabwe’s principal debt has not been the real challenge to our economy. What has been are the interest rates levied on unsettled arrears, thus bloating our debt more than threefold. The arrears have thus become the new debt. Government is urgently looking at ways to bring this runaway arrears situation under tow, and hence the Sharm el-Sheikh meeting, which has been preceded by several high-level brainstorming meetings held here at home.
Former President of Mozambique Joachim Chissano and African Development Bank president Dr Akinwumi Adesina are leading the country’s arrears clearance and debt resolution programme. I am most grateful to the President of the African Development Bank, Dr Akinwumi Adesina, and former President of Mozambique, His Excellency Joachim Chissano, for readily agreeing to play the onerous role of Arrears Clearance and Debt Resolution Champions for our country, Zimbabwe.
Their intercessions are already bearing fruit, and we begin to see windows gradually opening, and goodwill and support forming and growing within the ranks of our creditor nations and development partners. No doubt, there is consensus in the country that the question of Zimbabwe’s Arrears Clearance and Debt Resolution must be tackled and resolved urgently, if the pace of our growth and development is to be accelerated.
Government has pursued prudent fiscal and monetary policy to guarantee macro-economic stability. Since the advent of the Second Republic, Government budget has run on a cash basis, thus avoiding unbudgeted overruns. This has never been so before, including under the much-vaunted Government of National Unity, GNU. Because of this fiscal discipline, often pursued even at the expense of social delivery, space has since been created for businesses to grow in a stable environment where disequilibria are minimised. Indeed, this has been the case until now.
As never before, my Government has pursued pro-business policies, including holding regular consultative meetings with businesses, especially in the early days of the Second Republic. The spirit remains that of ensuring that Government, Business and Labour work together in concert and harmony, in the spirit of tripartism. As I write, most policies shaping our business environment are a crystallisation of recommendations from Business, which my Government embraced in a spirit of trust and partnership.
Partly to support Business and partly to offset the negative effects of Covid-19 global pandemic, and subsequent worldwide disruption of supply chains, we introduced the Foreign Currency Auction System, again as a recommendation from Business. The weekly forex auction system has largely held, thus facilitated price discovery and equitable access to this much-needed resource for Business. Today our exchange rate is determined from this auction system, and not arbitrarily as before.
Cumulatively, over US$4 billion has been channelled into Business through the auction system. This money, which ordinarily belongs to Government, is over and above several concessions made to Business, which include 75 percent export retention and a further 15 percent retention in proceeds from domestic sales in foreign exchange, which used to come to Government. All these are monies which reach Business on relatively easier terms, than would obtain through direct bank loans. By and large, it is this US$4 billion from the auction system which explains upward of 66 percent capacity utilisation in Business, and for the over 80 percent of locally manufactured products now found on our shelves. Through this facility, businesses have been able to retool, modernise and to import much-needed raw materials.
Speaking more broadly, the Business environment has never been this hopeful, in spite of the punitive sanctions which have been with us in the last 23 years. All the fundamentals are now stable, including the current surplus position on our foreign exchange earnings, against our yearly national needs. The more than US$11 billion foreign exchange earned last year, is the highest ever done by this economy, and is certainly far higher than in most economies in Sub-Saharan Africa, outside South Africa. Sadly, this has not translated into a stable exchange rate.
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