For the complete interview
with Dr. Gideon Gono:
Reserve Bank Governor Dr. Gideon Gono Sees Light at the End of the Tunnel
by Paul Trustfull
GlobalVision magazine recently had the exclusive opportunity to interview the Governor of the Reserve Bank of Zimbabwe, Dr. Gideon Gono. Editor-in-Chief Paul Trustfull discussed a wide-range of economic and political challenges faced by this important African nation.
PT: Dr. Gono, in what ways do you see the challenges being faced by the Zimbabwe and American economies as being different?
GG: The Zimbabwean economy is undergoing formidable challenges, characterized by high inflation, acute balance of payments deficits, capacity under-utilization as well as the exogenous effects of the rise in global oil and food prices.
When one looks closely at the USA economy it is apparent that the country is also limping from what, by any account, is a recession. The US situation is characterized by rising unemployment, sluggish economic growth, a housing slump, burgeoning balance of payments trade deficits, as well as instability in the financial sector. In addition, the environmental effects of global warming present a phenomenon that has taken decades to sink into the heads of policy-makers.
However, whilst the USA and Zimbabwe share some difficulties, Zimbabwe also suffers the adverse impact of economic sanctions. For the past decade, Zimbabwe has had virtually no Balance of Payments support or any meaningful offshore capital inflows. This includes the freezing of support to the country by the International Monetary Fund and the World Bank, which has had an adverse impact with creditors and the investor community at large.
These challenges notwithstanding, the Reserve Bank is committed to doing everything in its power to help the common Zimbabwean.
PT: How difficult is the business and economic situation in Zimbabwe at present?
GG: The present situation in Zimbabwe requires that several adjustments take effect simultaneously, and without delay. First is the need for all politicians in the country to place Zimbabwe First and amicably settle their differences in the interest of cultivating the right economic environment. No Central Bank or Fiscal Authority could be satisfied with the level of GDP underperformance we are experiencing currently.
Equally, the foreign exchange shortages are feeding the inflationary spiral through the illegal foreign exchange parallel market causing a serious imbalance, which needs redress.
So, yes, the situation in Zimbabwe requires that we do more to stabilize and grow the economy.
PT: What is the Reserve bank doing to improve the life of the average citizen?
GG: Faced with the extraordinary circumstances confronting Zimbabwe, it became clear that the Central Bank could not sit back whilst the socio-economic situation is being challenged on several fronts.
In the case of Zimbabwe, I am very confident that our interventions are far-sighted and will yield dividends over the medium to long-term. Our current efforts are aimed at establishing an economy that has single-digit, low and stable inflation; full capacity utilization of its industries, growing investment inflows; increasing export receipts; a healthy workforce and improving welfare of the majority of its people; and a Zimbabwe that has self-sufficiency of food requirements.
PT: What are the other challenges that you as Governor of the Reserve Bank of Zimbabwe are facing?
GG: As Governor I am often involved in extraordinary and, at times, unorthodox tools and instruments made indispensable by exogenous factors confronting the economy. Zimbabwe has implemented an unprecedented Land Redistribution Programme, a fundamental structural shift in the economy aiming to correct nearly a century of injustice against indigenous Zimbabweans. One of the unfortunate consequences of this Programme has been the imposition of sanctions against Zimbabwe. Sanctions have acted as a brake on the economy, making it very challenging to balance the twin objectives of inflation control and growth with social progress.
PT: What measures are being taken to attract foreign investment into the country?
GG: Economic challenges notwithstanding, Zimbabwe is implementing measures to attract greater foreign investment. Firstly, the Exchange Control system allow for 100% dividends remittance by foreign investors. In addition, Zimbabwe is also streamlining investment application procedures. Also under active consideration are measures to streamline the country’s fiscal regimes for new investments.
PT: In what sector does the economy need the most foreign investment?
GG: Although Zimbabwe is a well endowed country in terms of the availability of natural resources, such as Gold, Platinum, Iron Ore, Chromite, Coal and coalbed methane, Additional areas of opportunity include power generation and coalbed methane gas drilling. The Sub-Saharan African region is experiencing a power deficit requiring urgent attention. Notwithstanding the Land Reform Programme there also remain lucrative opportunities in the agro-industry.
Phenomenal investment opportunities exist in Tourism. Zimbabwe is blessed with acclaimed resorts, wildlife, as well as the Mighty Victoria Falls, one of the seven Natural Wonders of the World. The forthcoming 2010 World Cup Soccer tournament in South Africa presents a rare opportunity for investors to enter Zimbabwe’s Tourism Sector.
PT: What is the Governor’s perspective on the world economy?
GG: My view is that the World economy is on the verge of a recession, notwithstanding the offsetting effects of positive growth in Asia and elsewhere.
The unfolding global food crisis, with rising energy prices and erratic climatic conditions are the main forces which must be responded to with greater urgency now than before, if the global economy is to be spared from a long recession.
It is also important to point out global tensions revolving around the Middle East, Russia and the response by the USA and the EU are significant market influences likely to sway the global economy in ways likely to exceed any imaginations.
With regards to overall financial stability, it is my considered opinion that the world economy has yet to see the worst effects of the mortgage crisis.
PT: Do you see light at the end of the tunnel for the situation in Zimbabwe?
GG: Yes. The sustained investments that Zimbabwe has made in its agricultural, mining, infrastructure and basic goods manufacturing sectors are expected to start showing a response during the second half of 2008. As these measures take effect, we are advising the political establishment in the country to quicken the pace in pursuing macroeconomic stability. I am very confident that the Nation is moving in the right direction.
PT: What is the Governor’s view concerning the prospect of Barack Obama becoming the next President of the United States?
GG: Much as we would not want outside influences on our choice of leaders, I would not want to be as presumptuous as to think I could comment on elections in the United States.
It is my personal view that, come November 2008, the American People will exercise their constitutional right, free of influence, to choose the leader they want to entrust with the mandate of leadership. That is the quintessence of territorial integrity, self-determination and sovereignty, is it not ?
As Zimbabweans, we will work with any leader the American People choose to preside over their Nation.