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LIQUIDITY CHALLENGES AND WAY FORWARD

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Title: ZIMBABWE S MINING INDUSTRY AND PROSPECT FOR GROWTH Author: David Last modified by: Moline Created Date: 6/16/2009 2:06:42 PM Document presentation format – PowerPoint PPT presentation

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Title: LIQUIDITY CHALLENGES AND WAY FORWARD


1
LIQUIDITY CHALLENGES AND WAY FORWARD
j. Mverecha
2
OVERVIEW
  • Introduction
  • Economic Recovery
  • Current Liquidity Challenges
  • FDI and the Economy
  • Impact of FDI on the economy
  • Way Forward

3
Introduction
  • Economy Prior to STERP
  • Multilayered policy induced distortions
  • Hyperinflation
  • Hyper Asset Price Bubbles
  • Economic meltdown2008
  • Inclusive Government STERP Measures
  • Liberalization of the economy
  • Multicurrency
  • Slow Capacity recovery
  • End of hyperinflation
  • Deflation
  • Steady but uneven recovery.

4
Introduction
  • Economy steadily recovering..
  • Price stability
  • Capacity utilization
  • Revenue growth
  • Deposits growth..
  • But Major Issues.
  • Liquidity challenges
  • Slow capacity recovery
  • Low output/wage equilibrium
  • Low savings and investment
  • Unemployment Poverty

5
Introduction
Inflation fundamentals improving.............
5
6
Introduction Inflation fundamentals.Uncertainty

7
Economic Recovery
GDP By Industry (USm) 2010 2011 2012
Agriculture 1266 1462 1703
Mining 919 1198 1593
Manufacturing 981 1025 1077
Electricity Water 269 275 284
Construction 92 94 96
Finance Insurance 241 248 257
Real Estate 122 125 128
Distribution Tourism 1290 1328 1381
Transport Communication 717 731 749
Public Administration 88 89 91
Education 167 170 174
Health 87 89 90
Domestic Services 64 65 66
Other Services 348 355 363
Less Imputed Bank charges -59 -57 -56
GDP at factor cost 6592 7197 7996
Net taxes on production 0 0 0
GDP at basic prices 6592 7197 7996
Net taxes on products 214 227 243
Real GDP at market prices 6806 7425 8239
Real GDP (yoy) 8.0 9.1 11.0
Nominal GDP at market prices 6999 8016 9337
Nominal GDP (yoy) 12.0 14.5 16.5
8
Economic Recovery
Gross Domestic Product by Industry at Constant Prices (US M) Gross Domestic Product by Industry at Constant Prices (US M) Gross Domestic Product by Industry at Constant Prices (US M) Gross Domestic Product by Industry at Constant Prices (US M)
  2010 2011 2012
Agriculture 34.0 15.5 16.5
Mining 44.0 30.3 33.0
Manufacturing 3.5 4.5 5.0
Electricity Water 2.0 2.4 3.0
Construction 1.2 1.8 2.4
Finance Insurance 2.2 3.0 3.3
Real Estate 1.3 2.0 2.2
Distribution Tourism 2.5 3.0 4.0
Transport Communication 1.2 2.0 2.5
Public Administration 1.5 1.5 1.5
Education 1.3 1.7 2.3
Health 2.2 1.8 2.2
Domestic Services 2.1 1.6 2.3
Other Services 1.8 2.0 2.2
Less Imputed Bank charges -3.3 -3.3 -2.5
GDP at factor cost 11.9 9.2 11.1
Net taxes on production -2.0 -2.0 -2.0
GDP at basic prices 8.0 9.2 11.1
Net taxes on products 5.0 6.0 6.7
GDP at market prices (yoy) 8.0 9.1 11.0
9
Economic Recovery..
  • Assumptions Optimistic Scenario
  • Accelerated mining sector and agriculture growth
  • Indigenization and empowerment framework on the
    basis of stakeholder consensus
  • Progress on Debt and Arrears Clearance strategy
  • Sustained GPA Progress Political and
    Macroeconomic stability
  • New investment in infrastructure energy, power
    and ICT
  • Structural reforms including privatization
  • Investment in Education, Health New ICT RD

10
Banking Sector Deposits
  • Growth in deposits from US1,4 bn in Dec-09 to
    US2,6 bn by April 2011

11
Liquidity Challenges Deposits Growth
12
Money Supply Forecasts.
May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
2,692,466 2,786,702 2,884,237 2,985,185 3,089,667 3,197,805 3,309,728 3,425,569
2,666,452 2,733,113 2,801,441 2,871,477 2,943,264 3,016,846 3,092,267 3,169,573
13
Liquidity Challenges..
  • Economy faces liquidity Challenges
  • Slow deposit Growth _at_Us2.6 billion (April)
  • Mainly short term deposits (90)
  • Financial intermediation growing slowly
  • Two Sources of Liquidity (Multicurrency)
  • Exports
  • Credit Lines
  • Economy Requires significant capital flows
  • Capitalization of firms
  • Working capital financing
  • New Equipment financing
  • New Projects (e.g Energy/infrastructure)

14
National Imperatives
  • National Imperatives
  • Economic Growth
  • Job creation and poverty alleviation
  • Investment in Education, Health, Research
    Development
  • New (wealth) value creation
  • Broad based economic transformation
  • Equity, Fairness Opportunity For All
  • SMEs growth transformation
  • Youth Gender mainstreaming
  • Financial intermediation is at the heart of
    economic growth
  • Economies grow due to investment/FDI...
  • China, India, Peru, South Korea, Taiwan

15
National Imperatives
  • To Achieve National Imperatives
  • Promote export growth
  • Secure Credit Lines
  • Engagement of International Community
  • External Debt Arrears Resolution
  • Address Banking sector Vulnerabilities
  • Capacitating Central Bank
  • Lender of Last Resort Function
  • Domestic stakeholder engagement
  • An All stakeholder approach
  • Govt, Business Labour (Policy Consensus)
  • Deal with Uncertainty
  • Political Policy Issues

16
Why Investment is Critical
  • Economic Growth Poverty Reduction
  • Economic Growth Improving living standards
  • Economic growth national development
  • Economic development long term stability
  • Economic Growth Social cohesion
  • Greece, Tunisia, Egypt, Jordan, Yemen..

17
Ghana and Malaysia
  • Both Were British Colonies
  • Both got independence same year
  • Both had similar per capita levels in 1957
  • In 2010, Malaysias per capita is 10 times higher
  • What accounts for the difference?

18
Ghana and Malaysia 1957
19
Ghana and Malaysia 2009
20
Ghana and Malaysia
  Malaysia Ghana
Population (millions) 2000 23 19
Percent of population below the national poverty line 16 33
Infant Mortality Rates (per 1000) 8 65
Adult Illiteracy 13 30
Agric share of GDP () 14 36
Paved road as of total (1998) 75 24
Per 1,000 people Telephone Main Lines (1998) 198 8
Personal computers (1998) 59 2
No. of listed domestic companies (1999) 757 22
Foreign Direct Investment in US million (1999) 1,553 17
Exports of Goods Services as of GDP (1999) 124 32
CPI Inflation Rate (2001) 1.4 33
Sources World Bank, World Development Report 2000/2001 2002 issues Statistics Dept., Malaysia
21
Per Capita Comparative Analysis 1960
22
Per Capita Comparative Analysis 2009
23
Seven Lessons From China
  • Specific Well Defined Economic objectives
  • Learning from own Mistakes
  • Understanding the Global dynamics
  • Far sightedness/ Focus on Long term
  • Mastery of International Engagement
  • Investment in Education, Health, R D
  • Nationalism balanced with Global Imperatives

24
Gold Prices..A window of opportunity
25
WAY FORWARD
  • Improving the Investment Environment
  • Improving the overall investment environment is
    critical for FDI.
  • Zimbabwe is presently viewed as a high risk
    investment destination.
  • Agreed Framework for IEE
  • Stakeholder Consensus

26
THANK YOU
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