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‘Reformist ED has the FDI woo-factor’

29 Dec, 2017 - 06:12 0 Views
‘Reformist ED has the FDI woo-factor’ President Mnangagwa

eBusiness Weekly

A London economic research company has backed the reform minded administration of President Mnangagwa to flip the tide of elusive foreign investment toward Zimbabwe, but warned hard-line FDI growth may not be realized until the full picture of the new political dispensation is clear.

The Southern African country has averaged FDI of just $400 million over the last two years, a performance dwarfed significantly by peers such as South Africa, Mozambique and Zambia despite similar or better natural attributes. The neighbours averaged $2 billion FDI annually.

BMI Research contents that growth of Zimbabwe’s economy, which Finance Minister Patrick Chinamasa contends will post 4,1 percent growth in the coming year, would be hamstrung by acute shortage of foreign currency, which has paralysed external payments for key imports.

“While the appointment of a more reform-minded president will offer a boost to investor sentiment, this will not feed through into headline growth figures until 2019 when the country’s political outlook is more certain.

“That said, scope for fiscal consolidation has improved following the appointment of a more reform-minded President in Emmerson Mnangagwa and we see the deficit narrowing more substantially in 2019,” BMI Research said. BMI said that efforts to consolidate Zimbabwe’s fiscal position will face headwinds from sluggish revenue growth and costs of a general election, scheduled for 2018.The shortage of hard currency in Zimbabwe will see the country’s current account deficit narrow further in 2018.

But BMI Research said a more optimistic outlook for foreign financing under the country’s new reform-minded President will see import growth tick up from 2019, limiting any further consolidation of Zimbabwe’s current account.

The London Research firm said the end of the Mugabe administration boded well for a more sustainable monetary policy going forward. BMI also cited greater scope for re-engagement with the international community, particularly with concessional lenders, increases the likelihood of a successful re-introduction of a local currency.

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