Moody’s ranks TSP as creditor positive

Business Editor
ONE of the top global credit rating agencies, Moody’s Investors Service, has ranked Government’s Transitional Stabilisation Programme (TSP) as creditor positive and transformative for the Zimbabwean economy.

In its latest commentary on the country, Moody’s contends that while there are many challenges towards economic transformation, the TSP blue-print is “ambitious and credit positive”.

Finance and Economic Development Minister, Professor Mthuli Ncube, launched the TSP programme in October where he explained the 15-month plan that captures reform initiatives to reverse economic stagnation and restore public finances after years of fiscal slippage. The plan also seeks to deal with chronic external imbalances that have crippled Zimbabwe’s foreign currency earnings.

“The TSP is a high-level plan and, while it includes programme-implementation architecture and a relatively detailed set of implementation matrices, it will rely heavily on the ability of various Government agencies and line departments to ultimately deliver on the ambitious fiscal consolidation and social development targets,” said Moody’s.

The agency also alluded to Zimbabwe’s low Worldwide Governance Indicators that point to limited ability to implement such an ambitious programme due to certain constraints. As such, it said although TSP underscores the Government’s commitment to restore creditworthiness, delivery on the programme will require thorough efforts. The TSP draws on the policy thrust from Government’ Vision 2030 and focuses on five strategic clusters – governance, macro-economic stability and financial re-engagement, inclusive growth, infrastructure and utilities and social development.

The TSP’s growth projections target acceleration to 6.3 percent in 2018 and to 9.7 percent by 2020, starkly more optimistic than the International Monetary Fund’s (IMF) latest projections that have growth decelerating marginally to 3.6 percent this year and rebounding to only 4.2 percent in 2019, noted the agency.

The expansion drive is supported by increased production in the agricultural and mining sectors, but scarce financing for private-sector development continues to hamper overall output, said Moody’s, adding that the stabilisation programme, which includes public spending support for development, needs to bridge expenditure gaps in order to achieve such aspirational growth targets.

Zimbabwe’s fiscal deficit increased to 12.7 percent of GDP in 2017 from 1.4 percent in 2014. Whereas Government originally targeted reining in the fiscal deficit to four percent of GDP in 2018, the TSP concedes the budget shortfall will be nine percent this year as revenue underperforms, while the performance of state-owned enterprises continues to weigh on the public purse, and recurrent expenditures prove difficult to contain.

Moody’s also said the country’s elevated debt burden and constrained access to financing was being exacerbated by outstanding arrears to international financial institutions, which account for 10 percent of its public debt.

The clearance of approximately $2 billion of arrears to the African Development Bank and the World Bank, in particular, is a precondition for Zimbabwe’s access to new concessional funding from international financial institutions, which will be critical for delivery of many of the broader economic and social development objectives outlined in the TSP, such as priority infrastructure projects in energy, water and sanitation, transport and communication, health, education, and agriculture. Zimbabwe is currently ineligible for debt relief under the Heavily Indebted Poor Countries (HIPC) or Multilateral Debt Relief Initiative (MDRI), although Minister Ncube has stated his intention to pursue multilateral debt relief akin to that achieved by Myanmar (which secured debt relief of around $6 billion in 2013).

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