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Zimbabwe Sees Stability Helping Double Economic Growth Next Year

Zimbabwe’s economy is forecast to grow 6.4 percent next year on expansion in agriculture and the mining industry, Finance Minister Patrick Chinamasa said, as he promised to foster a stable investment climate.

Chinamasa, delivering his first budget speech since being appointed by President Robert Mugabe in September, said growth this year of an estimated 3.4 percent reflected subdued commodity prices as markets saw “biting” liquidity conditions.

“We are anticipating stable political stability next year,” he told lawmakers in the capital, Harare. “There will be clarity on indigenization to build confidence. Our biggest challenge is characterized by policy confusion and inconsistency to attract both domestic and external investors.”

Mugabe, the 89-year-old leader of the Zimbabwe African National Union-Patriotic Front party, extended his 33 years in power by winning July elections, ending a power-sharing government formed in 2009 after a disputed vote.

The unity government helped return the economy to growth after seven years of recession and bring the inflation rate to a single digit after peaking at what the International Monetary Fund said was 500 million percent in 2008. Former Finance Minister Tendai Biti, of the opposition Movement for Democratic Change led by former Prime Minister Morgan Tsvangirai, formalized the previously illegal use of multiple currencies.

Foreign Currencies

The policy allowing foreign currencies as legal tender will remain and the government has secured $100 million from the African Export-Import Bank, based in Egypt, to recapitalize the interbank market, Chinamasa said.

“This is necessary to restore confidence in the local financial sector,” he said.

Chinamasa said a IMF staff-monitored program has helped steady the economy and he called on creditors to forgive the country’s debts and nations to remove sanctions for “the betterment of the economy.”

The European Union in September ended sanctions against the state-owned Zimbabwe Mining Development Corp., which has five mining joint ventures in the Marange district.

Government revenue will rise to $4.4 billion next year from $3.7 billion this year, Chinamasa said.

Chinamasa reiterated the government’s commitment to forge ahead with an indigenization policy to give black Zimbabweans control of the economy. The southern African nation holds the world’s second-largest platinum and chrome reserves, as well as diamond, gold and coal deposits.

Mugabe is forcing mining companies such as Impala Platinum Holdings Ltd. and Anglo American Platinum Ltd. and banks including the local units of Barclays Plc (BARC) and Standard Chartered Plc (STAN) to cede majority stakes in their local assets to black Zimbabweans or the government.

The law “is here to stay and there will be no amendment,” Chinamasa said. “I want to call on all those mining companies that have already entered into preliminary negotiations to complete those negotiations.”

To contact the reporter on this story: Godfrey Marawanyika in Harare at gmarawanyika@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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