A UNITED NATIONS (UN) senior official has urged government to exercise fiscal discipline and continue in its engagement with international partners.
BY TATIRA ZWINOIRA
This comes as the UN World Economic Situation and Prospects Report showed that Southern African region’s growth was expected to increase by 3% in 2016 from last year’s 2, 5 %.
The slow growth was largely driven by sluggish growth in the region s biggest economy, South Africa, low commodity demand and prices, particularly minerals and oil and the huge reliance of these countries on primary products.
UN Economic Commission for Africa executive secretary Carlos Lopes said the cash-based fiscal policies resulted from a lack of access to international financial resources due to indebtedness and the economic sanctions.
“The main reasons for cash-based fiscal policy are the lack of access to international financial resources due indebtedness and the economic sanctions, the need to exercise fiscal discipline, and the dollarisation of the economy,” Lopes said.
“With regard to my first point, the continued re-engagement with the international community and the implementation of the debt clearing strategy agreed with international financial institutions will facilitate access to resources.”
Zimbabwe adopted a cash budget system in 2009 at the adoption of the multi-currency regime.
Lopes said the sources of slow growth in the Southern region of the continent were external, namely, low commodity demand and prices, particularly minerals and oil and the huge reliance of these countries on primary products.
According to the UN report, primary commodity exports such as minerals, oil and agricultural products have been subjected to unsteady changes in prices on the international markets which were affecting minerals.
Lopes said dealing with policy issues including the teething problems around indigenisation and the participation of foreign investors in the Zimbabwean economy would result in increased foreign direct investment inflows and more local jobs.
“The deflationary environment needs to be addressed expeditiously as this discourages investment. In this regard, authorities should address supply side challenges to increase competition in the sector and hence bring down prices,” he said.
Lopes said the cash-budget system has served the country well in restoring macroeconomic stability but the strengthening of the United States dollar was undermining export competitiveness and by extension industrialisation efforts.