'Improved credit rating signals Zim's right direction'

'Improved credit rating signals Zim's right direction'
Published: 14 March 2018
STABILISATION of credit rating entails that Zimbabwe's risk profile has improved and the country now has an opportunity to secure fresh lines of credit and new investments, economists said yesterday.

Globally recognised South African credit ranking institution, NKC African Economics, has positively rated the country from negative to stable. President Mnangagwa has said the recent positive credit rating was the first of its kind in 20 years, informed by the economic reforms being implemented by the new political administration.

In separate interviews, economists said improved credit ratings were an endorsement of the new political direction the country was taking.

The transition has also received approval from across the globe, marking an end to the adverse effects of being isolated from the international community.

"Basically, stabilisation of credit ratings is not only restricted to the country being able to negotiate with multilateral institutions for lines of credit, but essentially points out that the political direction of a country is receiving approval.

"It also entails that economic policies are in sync with business expectations and that the country can negotiate for Foreign Direct Investments (FDIs) with investors from across the world," economist, Dr Davison Gomo, said.

Over the years, Zimbabwe's has suffered lack of FDI due to its position on economic policies such as the Indigenisation and Economic Empowerment Act, which has since been reversed by President Mnangagwa. Under the new regulations, the 51/49 percent shareholding is now applicable to platinum and gold sectors alone.

Former Zimbabwe National Chamber of Commerce past president, Mr Luxon Zembe, said the new credit rating implies that the country's risk profile was no longer on the negative side.

"What is now important is to ensure the country risk improves so that Zimbabwe is not perceived as a high risk country to do business with.

"If the country's risk profile is high, it means that it finds it difficult to do business or attract FDIs because of how it is perceived. The higher the risk profile, the higher premium local companies are charged when they apply for offshore credit lines," he said.

Mr Zembe applauded President Mnangagwa and the new Government for working towards improving the economic climate in Zimbabwe through restoration of the rule of law, property rights, as well as harnessing corruption and the political will to ensure the forthcoming harmonised elections are credible, free and fair.

BancABC group economist, Mr James Wadi, echoed similar sentiments adding that the improved credit rating status for the country simply speaks to positive investor sentiments.

"The shift from negative to stable in terms of the credit rating for the country is more like thumbs up to what Government has done so far and intends to do," he said. Since coming into power last November, President Mnangagwa has pushed for re-engagement with Western countries departing from the separatist policies of former President Mr Robert Mugabe.
- zimpapers
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