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Government must review some aspects of the $18 billion economic recovery and stimulus package to address negative impact of the Covid-19 pandemic by putting provision for access to foreign currency for key imports, industry has said.
Industry also raised concern over the 90 day grace period prior to repaying the loans and the interest of 20 percent per annum, saying the repayment period was too short and the funding cost was a bit elevated for competitiveness in the region.
This comes after the Ministry of Finance and Economic Development, last week announced terms and conditions of the $18 billion recovery and stimulus funding to be distributed through commercial banks.
A significant chunk of the rescue funding, about $10,6 billion, has been earmarked for on-lending to borrowers in the productive economic sectors of agriculture, mining, manufacturing and tourism.
The agriculture has already started drawing down on the facility.
Confederation of Zimbabwe Industries (CZI) president Joseph Gunda, said the bail out was critical to reboot production, but the funding must entail access to foreign currency, as industry needs to import raw material, equipment, spares and technology.
“For the package to have meaningful impact on the economy, it must provide for access to forex as most critical inputs into production are imported, while galloping inflation may render local currency bailouts of little positive impact,” he said.
Using the G20 countries as an example of global response to the COVID 19 pandemic, a total stimulus package of US$5 trillion (7.4 percent of GDP) has been adopted. This is in response to the area’s forecast GDP contraction of 0.4 percent.
Notable examples include Japan being the biggest at 21 percent of its GDP: the United States of America with 11 percent; Australia 9.9 percent; Canada 9.8 percent; the European Union 4 percent; Germany 4,9 percent; France 5 percent; Russia and Indonesia both with 2,8 percent of GDP.
Closer home within the SADC region, using South Africa in similar fashion, has announced a Rand 500 billion (USD26 billion) stimulus package (10 percent of GDP). Additional measures include a cut of the repo rate by 200 basis points by the Central Bank, SARB, thereby releasing R80 billion in reserves.
The case for South Africa, being Zimbabwe’s biggest trading partner accounting for about 40 percent, is of keen interest. The package is being funded from a reprioritisation of Rand 230 billion from the current budget while the rest is debt and grants from local and international partners including the World Bank, IMF, the BRICS new development bank and the ADB. The country’s unemployment rate is 29 percent.
In line with this global trend, Zimbabwe’s own stimulus package of ZW$18 billion is (9 percent of GDP). This also included a cut of the reserve ratio by 500 basis points releasing ZW$2 billion in reserves.
Notably though, Zimbabwe cannot rely on the same sources of funding as the South African counterparts and indeed as any other neighbouring countries within the SADC region. The country has to be more innovative from both the funding and utilisation perspectives.
Read More in Business Weekly on Friday
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