FORMER Finance Minister Tendai Biti has trashed the $600 million loan deal struck by President Emmerson Mnangagwa and his Botswana counterpart Mokgweetsi Masisi, saying it is too little to have an impact on Zimbabwe’s private sector.
Biti said the money was a drop in the ocean for a country which needs nearly $2 billion to retool and capacitate its industry.
“That’s a drop in the ocean. That is absolutely nothing. The industry itself needs about $2 billion to retool,” he said, adding money alone would not save the country’s economy because there were a lot of micro-economic fundamentals that government needed to get right.
“In any event, it’s not about the money. Do we have the right micro-economic fundamentals, a decent exchange rate? There is chaos with the situation of the RTGS$ [real time gross settlement dollar]. The statutory instrument shows that it’s a virtual currency and the politics is just not right, so you can pour money, but that won’t change anything,” he said.
Owing to the political uncertainty at home and indebtedness, the country has been struggling to get badly needed lines of credit from international financial institutions and is now turning to its neighbours for help.
The United Kingdom and European Union have demanded political and economic reforms as a prerequisite before they can extend lines of credit to Mnangagwa’s administration.
Confederation of Zimbabwe Industries president Sifelani Jabangwe said the loan could have a significant impact on industry and the economy by boosting the depleted nostro accounts, adding that the money would go a long way to help retool small businesses.
“It will boost the nostro accounts and provide capital for retooling. This will significantly help business that require around US$500 000 and below to retool and ramp up production and productivity,” he said.
The loan will consist of $500 million dollars for Zimbabwe’s diamond industry and a further $100 million to help private companies, whose operations have been hamstrung by the dollar shortage, the state-owned Herald newspaper said.
Since coming into office, President Mnangagwa has been in drive to attract the much-needed foreign direct investment and loans to capacitate the country’s ailing industry.
Zimbabwe’s external debt currently stands in excess of $10 billion, presenting a massive setback on the economy.
Apart from what have been coined mega deals and commitments to invest, the Mnangagwa administration has not been able to record meaningful economic traction.