Opinion

Eddie Cross Says IMF Is Wrong, Mthuli Ncube Is Right

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The International Monetary Fund (IMF) has predicted that Zimbabwe would slide into recession this year, contracting by about 5.2%.

Economist Eddie Cross, however, says IMF does not understand the Zimbabwean economy. Cross also says he believes what Finance Minister Mthuli Ncube projected that the economy will grow by about 3%.

“I think that they (IMF) are being too pessimistic. Mthuli (Finance minister Ncube) believes that we are going to get growth of 3% and I think he is right. I do not think the fund (IMF) understands the Zimbabwean economy.

“What do I agree with them is that I think we have got to recognise that what the government has done in the last year has been to shift the economy from consumer led growth path to export-led growth and the changes in monetary policy have emphasized that,” Cross said.

He added: “So, the exporters are in a situation where they are in receipt of very substantial premiums on export proceeds and this is going to lead to growth, export-led growth. But, clearly, if you boosted consumer demand by boosting incomes or reducing Paye (Pay As You Earn) or whatever it would have an immediate impact on growth.

“With export led growth there is a time lag because what happens is that you introduce the incentives and then it takes time before they kick in and result in exports.

“There is a lag between providing the incentives, assuring the exporters that the incentives are not temporary and that this is a genuine change in policy and the actual growth that will result in that.M

“So, I think the fund has looked at that and said ‘look you are going to shock domestic consumption’. China is doing exactly the opposite by shifting from export-led growth to domestic demand-led growth and when you make a shift like that it changes the growth pattern.

“So, I think we are going to see growth, I don’t think they are right about the negative growth, but they are right in sense that we are going to see subdued growth until the export industry can respond to the export incentives.”

Economist John Robertson thinks the IMF has projected the Zimbabwean economy well. He said said: “I think that the IMF has more accurately measured the capacity in the country now. The fact is that we have not done any important work in investing recently and we still have constraints on the amount of investments that actually take off now.

“We have got a scarcity of money and a scarcity of investors with the confidence to come here and so we have not attracted the investment capital that would overcome our liquidity problems. And of course, we are still presenting a very uncertain future because of the number of constraints that are still imposed on new investors.”

Last October, Ncube launched a 15-month plan which includes reform initiatives to revive the country’s sluggish economic growth, restore order to public finances after years of fiscal slippage and address chronic external imbalances that have left Zimbabwe with excessive date extreme foreign-currency shortages.

The Transitional Stabilisation Programme’s projections target 6,3% in growth by year-end and before accelerating to 9,7% by 2020, starkly more optimistic than the IMF latest projections.


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