Zimbabwe falling behind – World Bank
HARARE – Zimbabwe is among the six countries in Africa that saw their debt to GDP ratios increasing by more than 20 percent, a report released by the World Bank says.
The report, Africa’s Pulse, says economic growth in Sub-Saharan Africa is rebounding in 2017 after registering the worst decline in more than two decades in 2016; although only seven countries are seeing growth rates above 5.4 percent in 2015-17. Zimbabwe, which has been recording low and slackening growth in the recent years was placed in the “falling behind” zone by the report and is the only country in that category.
The report notes that most countries in the region have little fiscal space to increase public investment because of their high debt to GDP ratios and the need for fiscal consolidation. Zimbabwe has a huge public debt of not less than $11 billion.
“External financing conditions have tightened with increased uncertainty in the United States and Europe, which makes tapping debt markets increasingly difficulty ad risky”, said the report. Already, Zimbabwe owes multilateral lenders billions of dollars, with the majority of it in arrears, which makes it difficult for it to get new lines of credit until it has fully repaid the arrears.
Since the country has domestic negative savings, it has to rely more on foreign capital inflows to carry out investments.
“In many countries, low tax revenues, weak banking systems and underdeveloped capital markets limit the share of domestic resources that can be allocated to public investment. In low-income countries, regulatory and implementation capacity constraints are key obstacles to scaling up public investment infrastructure” said the report.
The report said the region faces a myriad of challenges to regaining the momentum on growth and that addressing these challenges will require deep reforms to improve institutions for private sector growth, develop local capital markets, improve the quantity and quality of public infrastructure, enhance the efficiency of utilities, and strengthen domestic resource mobilization.
Ethiopia, Tanzania and Rwanda have been identified by the report as resilient countries enjoying robust and broad-based growth. “These countries generally have better macroeconomic management, and… have managed to contain non-priority spending and mobilize domestic revenue, building fiscal space for investment and social spending”, says the report.