GWERU, August 3 (The Source) – World Bank senior country economist Johannes Herderschee says protectionist measures introduced by finance minister, Patrick Chinamasa last week would not help local industry, which he said had no capacity to meet demand and needed more support for retooling and recapitalising.
The minister banned the importation of second hand clothes and shoes with effect from September 1 as part of measures to help resuscitate the economy in his mid-term fiscal policy review. He also removed from travellers rebate some grocery items, saying there was no justification for their continued import since the local industry was producing such goods.
“Import restrictions will go against the flow. This will raise the costs of production and make local companies uncompetitive,” Herderschee told delegates at the Confederation of Zimbabwe Industries which closed at the weekend.
He encouraged government to instead support companies to boost their competitiveness.
“Such restrictions are supposed to be time bound. They should encourage the growth of the industry and competitiveness of the local industry,” he said.
Zimbabwe’s trade deficit remains high, with exports in the first six months amounting to $1,23 billion compared to $3,1 billion in imports.
“The current account deficit is big and it is not sustainable. But at the moment the country cannot do without imports,” said Herderschee.
Central bank governor John Mangudya told the delegates that companies failing to repay bank loans will face penalties under proposed amendments to the Banking Act, which will aim to reduce the level of non-performing loans (NPLs) in the economy.
NPLs ravaged the banking sector, leading to the central bank last year setting up the Zimbabwe Asset Management Corporation (Zamco), a special purpose vehicle to purchase the over $700 million toxic loans in the system to plug holes in banks’ balance sheets.
The level of NPLs has fallen to 14 percent from 20 percent in December last year after the closure of several highly exposed banks while Zamco has so far taken over $100 million of the bad loans.
“We still have a lot of companies who are borrowing and not paying back. That is the reason why we have non-performing loans,” Mangudya told delegates at the Confederation of Zimbabwe Industries which closed at the weekend.
“The liquidity crunch comes because companies are not paying back.”
Mangudya, who said he expects to announce the mid-term monetary policy this week, added that business was letting down the banking sector by failing to keep its end of the bargain.
The proposed Credit Bureau will be empowered to penalise companies that do not pay back loans, he added.
“The monetary policy will look at ensuring the growth of the banking sector. Going forward we are going to amend the Banking Act,” said Mangudya.