“If you look at how we have managed our economies, how we have discovered the joy, the pleasure of macro-economic stability, since 2000, and how those economies have grown, it has been a wonderful story,” he said in a speech in London.
Tendai BitiWith average annual economic growth of 5 per cent, Africa generally, and Zimbabwe specifically, were gradually shaking off the legacy of lost decades in the years immediately after independence. Zimbabwe celebrated 33 years of independence on April 18, still with deep financial problems but in the knowledge that the worse was now behind it, he said.
Mr Biti was in London last week, on his way back to Zimbabwe after attending the spring meetings in Washington of international finance institutions including the IMF and the World Bank. In a presentation to think tank Chatham House, he outlined his vision for the financial services industry, in the context of the problems it has faced in the 33 years since Zimbabwe gained independence.
“The first decades of independence were a total waste because for those who liberated us — and we’re very grateful for that, the struggle for decolonisation was a very important thing — there was a fundamental thing, the misunderstanding of growing economies, of sustainable development, of freeing up economics. And a lot of our leaders spent a lot of time, seeking the “political kingdom”. But since 2000 we suddenly discovered the importance and centrality of well-managed economies.
“Since then the continent has been growing at an average of 5 per cent, which is only exceeded by the Asian Tigers, by Southeast Asia. By 2020, the population with disposable incomes on the African continent will be 128 million, up from 90 million. That’s people with per capita income of $2,000 and above, those who can afford to buy flat-screen televisions, send their children to private schools, take their families on holiday in Durban, Mauritius. Fantastic figures that speak to the rise of the middle class.”
In that environment, he said, the potential of Zimbabwe’s financial services sector to become a key driver of growth was “immeasurable”.
“When we dollarised in 2009, our dollarisation was not proper dollarisation in the technical sense, where the new currency buys the old currency. What we did was a kind of appropriation — thank God no one took us to court; I’m a lawyer so I can say this now the three years of prescription has expired. People just woke up one morning and found their Zimbabwe dollar balances valueless. This was not dollarisation in the technical sense.
“The financial services sector, in February 2009 when we dollarised, had assets of US$359 million. That essentially means that the assets that they had were just the computers, software, the buildings, their vehicles and other physical assets. But they built their reserves on their own, so that by the end of 2009, the banking sector had assets worth $1.2 billion. Now the money in circulation, broad money supply, or M3 as economists call it, is $4 billion.
“At any given time the amount of money sitting in the bank in closing balances is anywhere between $700 million and $1 billion. So this is a fantastic sector, which is why some of us say it’s a sector we can’t touch. It’s a sector that has played a great role in Zimbabwe.
“The current account is widening, so with the balance of payments crisis back, our ratio of exports to imports is 1:3, closer to 1:4. In 2012, we had imports of around $7 billion, exports of around $3 billion. In the first quarter of the year, January to March 2013, we had total imports of $1.7 billion, a 14 percent increase from this time last year.
“Exports are around $600 million, a 10 percent drop from this time last year. So imports are on the increase, by 14 per cent; exports are on the decrease by 10 percent — that’s the extent of the current account deficit. And with little investment, the capital account situation is also in a disastrous situation.
“The question is — who has been financing this gap of $7 billion to $3 billion. Fine, there have been diaspora remittances. But the key financier of our current account has been our banking sector — the banking sector has been the epicentre of the stability that we have seen in recent years. I see that with many instruments — equity capital, hedge funds, growth of the stock exchange – I see the growth of the financial sector as a major driver of the growth of the economy.
“Another challenge — another key thing we have to deal with, which I’m dealing with right now, is Zimbabwe’s sovereign debt. We have got an unverified balance of $10.7 billion right now. In the Ministry of Finance we have established Zimbabwe’s Debt and Management Office, run by a very competent man called Andrew Bvumbe. So we are at 96 percent in terms of actual of verification of what we owe, including talking with the creditors.
“I have constructed a home-grown debt resolution programme called Zimbabwe Economic Development Strategy (ZEDS). And the reason why I’ve called it ‘development’ is that it’s really not about our debt, because we defaulted as far back as 1999. But as far as we have this debt overhang, and the arrears with the IMF and the World Bank, number one, we can liberate Zimbabwe’s balance sheet. It’s a huge balance sheet, but it’s clouded by this debt.
“Number two — the risk profile remains very, very high. Those who have rated us, we are on D-minus Even with our friends, the Chinese, the rating is D-minus. The net effect is that we cannot go on the international markets to borrow money.
“The President of the African Development Bank, Donald Kaberuka, has been a very good friend of Zimbabwe and it pains him that he has not been able to have a proper programme with Zimbabwe. Each time we meet him and we have dinners, I always sit on the top table with him. So I said to him one day, why do you always seat me on your right side? And he said to me, ‘Tendai, that’s my way of penance because you are the only country that I’m not giving money to.’
“It is important that we deal with debt resolution.” – http://zimbabweelection.com/2013/04/30/zimbabwe-election-zimbabwe-has-discovered-the-joy-of-economic-stability-biti/
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