Online Reporter
THE Second Republic’s consistent monetary and fiscal reforms, which have culminated in low inflation rates, a stable local currency and a decent return on investment for foreign capital, are now being increasingly acknowledged by the wider world.
The latest recognition comes from Citibank, the third largest bank in the United States of America and a major global financial services group.
In a report, the bank warned potential international investors that they could be missing out if they stayed aloof, a complete reversal of the sort of warnings which were being issued a few years ago.
The speed at which the reforms introduced by the technocratic team appointed by President Mnangagwa at the start of the Second Republic suddenly started bearing good harvests last year, although this only became statistically apparent this year.
This may have resulted in investors not really noticing.
Some of the time lag is needed to produce figures for low annual inflation, which appeared in Zimbabwe at the beginning of this year although those studying the monthly figures last year knew that the annual figures, showing what happened in the previous 12 months, would show a dramatic if unsurprising decline.
Strict fiscal discipline was introduced late in 2018 with proper Government budgeting and closely monitored spending.
That provided the base for a long series of reforms in monetary policy by the Reserve Bank of Zimbabwe, and it took a major effort by both Government and the Reserve Bank to find all the taps, private as well as public, that were increasing money supply beyond extensions of value.
That was finalised during 2024 and so the statistics started changing.
Zimbabwe’s inflation rate is amongst the lowest in the world, at just 2,9 percent this month after averaging 4 percent for most of the year.
At the same time, the Staff Monitored Programme of the International Monetary Fund, started late last year, has been giving careful reports that Zimbabwe is meeting targets.
The targets are largely internally set, of course, since all Zimbabweans wanted what the targets define. But the IMF is now, in effect, a sort of external auditor, and that adds strength to the Zimbabwean position, having clean regular audit reports.
The Citibank comments are important because this is a private sector bank, not connected to any Government or the global monetary authorities, and having the private sector backing the official versions of the IMF and the Government is more than useful.
Zimbabwe’s successful reforms, with the IMF certifying their effectiveness and accuracy, are opening up the country’s access to capital markets. One recent example is the CBZ-syndicate to fund the refurbishment of the Harare-Chirundu Highway.
This will involve the revenue conservatively expected from the tollgates on that highway, providing both the security for the loan and cash for the servicing and repayment within the agreed time.
This has already been done successfully on the Mutare-Harare-Bulawayo-Plumtree Highway and now, using the top Zimbabwean contractors who can provide records of the cost of their work, incidentally significantly lower than external contractors, the sums are simply the routine work of a banker.
On a larger scale, the resolution is now in sight for that overhang of debt arrears halting access to global low-interest institutional development funding. The terms still need to be sorted out, but the bits are in place, starting with the successfully reformed Zimbabwean finances.
Basically the bulk of the debt needs to be rescheduled with an agreed payment plan in place based on what makes sense with the reformed fundamentals.
Britain and France have now agreed to co-host the detailed discussions, showing that all who matter are expecting the whole situation to be resolved satisfactorily.
That in turn will restore Zimbabwean access to new development capital.
The Government has taken some pains to make it crystal clear that any borrowing, internal or external, private or public, has to be solely for finding capital for productive and revenue generating programmes and projects.
Some development, and the public sector health network and most of our education system, cannot use borrowed funds and have to be paid out of taxes.
There is no way that there can ever be a financial return on building new schools and hospitals if we are going to guarantee universal access.
But this means that the capital budgeting of tax income by Government, which is the second largest item after staff costs, can concentrate on these social capital programmes with borrowed development capital assigned to spending that generates enough revenue to repay the loan.
Lower and concessionary interest rates mean that more work, such as dams that sell the water they impound, can come at least partially from such borrowing as even modest revenues can pay back the costs of the capital.
Of course, all these advances mean that we have to remain financially disciplined, but we all want that anyway as the benefits already flooding in are desired, and if they keep rising, then no one will want to wreck the progress.
