Zimbabwe central bank urges change as investment slumps
August 27, 2014, 12:04 am TWN
HARARE, Zimbabwe--Foreign investment in Zimbabwe more than halved in the first six months of the year, the central bank chief said Monday, calling for the country to “fight the negative perception” that was scaring off capital.
The news came as Mugabe, Africa's oldest leader at 90 who held onto power in disputed national elections last year, kicked off a trip to China aimed at luring investment in the nation's stagnant economy.
Central Bank chief John Mangudya said Zimbabwe needed to come up with credible policies and fight negative perceptions to attract desperately needed capital as the country battles economic crisis.
He called on the country to “fight the negative perception that Zimbabweans continue to create, knowingly or unknowingly, for ourselves.”
“Investment inflows into Zimbabwe have remained subdued due to the perceived country risk,” Mangudya said in a monetary policy statement.
In the first six months of 2014, the country received US$67 million (51 million euros) compared to US$165 million during the same period in 2013, the statement said.
Mugabe has ruled Zimbabwe since 1980, his more than three decades in power starting amid optimism but eventually characterized by corruption, enduring economic crisis and brutal crackdowns against political opposition.
In the face of Western opprobrium he adopted a “look East” policy, forging new ties and buttressing existing ones with east Asian countries, including China.
Once the breadbasket of southern African, the country now imports basic goods from neighboring countries and is grappling with unemployment of around 80 percent.
Zimbabwe was forced to slash its growth forecast for the year from 6.1 percent to 3.1 percent due to weak economic activity.
Investors have been scared off by Harare's controversial indigenization law, which prohibits foreign companies from controlling foreign owned businesses. Earlier this year, Harare said it will amend the law.
“There is therefore need for the country to create an investor-friendly environment so as to tap into these external capital resources to boost employment, production and exports,” he added.
The solution lies in “putting in place credible, consistent and predictable investment policies,” Mangudya said.
Zimbabwe is in the throes of an economic crisis characterized by tight liquidity crunch, companies closures, non-performing loans and a “disproportionate trade balance,” according to the bank governor.
“This subdued level of exports further compounds the liquidity situation and deceleration in economic activity,” he said.