World Bank official: loans for Zimbabwe a long way off

Aug 31, 2011, 16:20 GMT

Harare - Zimbabwe, still struggling to recover from a catastrophic economic collapse three years ago, is still 'far off' from qualifying for World Bank financing, a senior bank official said Wednesday.

The country endured eight years of negative growth, inflation of 500 billion percent, a currency that was rendered worthless and a severe breakdown of infrastructure that many economists blame on President Robert Mugaabe's policies.

But after entering into a coalition government with the opposition in 2008, Zimbabwe has cut inflation to less than 5 percent, introduced the US dollar as its currency and forecasts growth this year of 9.3 percent.

But World Bank country director in Zimbabwe Kundhavi Kadiresan told a press conference here that the country still faced 'enormous problems.'

Although growth was 'impressive,' the country was still bedevilled by an external debt burden of 8.8 billion dollars, of which 6 billion was in arrears. The bank was in talks with the government over the debt, she said.

The country's power utility is able to produce less than half of the 2.2 million megawatts needed to meet demand, and would need to raise 13 billion dollars to revamp the power sector, she said.

Huge investment was also needed to achieve functioning road maintenance, and manufacturing industries were crippled by 'very old' machinery.

'It's very hard for Zimbabwe to be competitive,' she said. The World Bank was 'really keen to work with the government in terms of getting this country back on track,' she said.

'However, there is still a long way from a normal relationship (with the Bank), due to arrears and lack of policy clarity.'

She cited policies pushed through by Mugabe's wing of the power-sharing government to force foreign and white-owned businesses to surrender 51 per cent of their ownership to black Zimbabweans.

This month Mugabe's black empowerment minister Saviour Kasukuwere threatened British-based banks Standard Chartered and Barclays with losing their banking licences if they did not produce an 'acceptable' plan for divesting their ownership to blacks.

Critics say that the 'indigenization' drive is a political strategy to boost votes for the 87-year-old Mugabe in elections expected in the next two years, and that the main beneficiaries can be expected to be cronies in Mugabe's Zanu-PF party.