Zimbabwean authorities should target lines of credit that are relevant to the needs of the local economy, or risk unnecessarily increasing the country’s risk of indebtedness, analysts at Morgan & Co suggest.
Despite being cut from most global banking lines, Zimbabwe has still found some “friends” in the likes of financial institutions such as the Afreximbank, the African Develop0ment Bank (AfDB) and historically friendly countries such as China and Russia.
But observers say whatever the country can secure in new lines of credit, they should be productivity-oriented.
“Credit lines may indeed stimulate production if they are targeted at export and production-oriented industries. Zimbabwe can also explore strategic lines of credit that enable the country to benefit through mechanization of industries and technical expertise from emerging nations such as Brazil.
“This could take the form of farm mechanization projects that are earmarked at increasing productivity,” said the analysts.
In a recent development local financial institution, NMBZ Holdings announced that it is in the process of arranging a US$20 million exporters facility for local firms.
Added Morgan & Co:
“NMBZ has been aggressive in terms of creating growth avenues by leveraging off its strategic equity partners.”
They also said “credit lines and engagement efforts should be complemented by proper reforms that are targeted at (i) dealing with country risk and (ii) managing the debt overhang.”
As at September 30, 2018 official numbers show that the country’s domestic debt stood at $9.62 billion and it is projected to marginally decrease to $9.57 billion.