HARARE – France says it is not yet ready to extend any financial support or credit lines to Zimbabwe.
Laurent Delahouse, the country’s ambassador to Zimbabwe, yesterday said his government was still assessing the economic and political situation before committing.
“It is too early to go into details about us (France) unveiling any credit lines to Zimbabwe given the economic situation in the country under the new dispensation,” he said.
Delahouse — who met Finance minister Patrick Chinamasa in a closed door meeting in Harare yesterday — told journalists that they discussed ways to intensify trade and economic links between the two countries.
France this week indicated that Zimbabwe is among the so-called highly indebted poor countries likely to benefit from debt cancellations by the French government next year.
Benoît Hamon, France’s Social Economy minister, confirmed the plan on Tuesday, saying in 2014, an estimated five countries — Somalia, Zimbabwe, Chad, Ivory Coast and Sudan — could see their debt completely erased.
“The debt relief is almost immediate, since we are transferring loans made in the past into donations,” he said.
The southern African nation, which has been battling acute liquidity challenges since the introduction of multiple currency system in 2009 due to lack of cheap credit lines, is desperately in need of fresh capital to revive its economy.
Multilateral institutions, particularly the Bretton Woods, suspended financial help to Zimbabwe when the country defaulted on repayments in 1999 when it started experiencing an economic downturn.
However, the International Monetary Fund (IMF) in June approved a staff monitored programme, an informal agreement to monitor the government’s economic programme but that does not involve financial assistance.
It was Zimbabwe’s first agreement with the IMF in more than a decade and successful implementation will be important in helping the country re-engage with the international community and deal with its large debt burden.
Economic analysts however assert that whether the new Zanu PF-led government can maintain relations with the IMF will be a test of its economic management.
The programme will include cuts in the public service wage bill — the second largest as a percentage of gross domestic product (GDP) in sub-Saharan Africa, at 16 percent of GDP compared with an average of 7,5 percent — as well as improve transparency in the remittance of diamond revenue.
While Zimbabwe faces a myriad of constraints to economic growth, lack of access to affordable medium-term funding remains the biggest problem.
The country needs at least $8 billion to get its economy kicking.
The country’s problems worsened during the decade of recession from about 1998 to 2008, when half its gross domestic product dissipated.
Other challenges now include old and antiquated equipment resulting in inefficiency and lack of competitiveness, high cost of funding, shortage of electricity, high cost of labour, erratic water supply, low aggregate demand and competition from low-priced exports.
The net effect of that has been industry’s incapacity to compete with imports or just to produce to meet local demand, forcing the country to rely on imports, which totalled $6,6 billion in the nine months to
Exports totalled a paltry $2,3 billion in that period.