1. LIQUIDITY CHALLENGES AND WAY FORWARD j. Mverecha

2. OVERVIEW  Introduction  Economic Recovery  Current Liquidity Challenges  FDI and the Economy  Impact of FDI on the economy  Way Forward

3.  Economy Prior to STERP  Multilayered policy induced distortions  Hyperinflation  Hyper Asset Price Bubbles  Economic meltdown……2008  Inclusive Government & STERP Measures  Liberalization of the economy  Multicurrency  Slow Capacity recovery  End of hyperinflation  Deflation  Steady but uneven recovery……. Introduction

4.  Economy steadily recovering…..  Price stability  Capacity utilization  Revenue growth  Deposits growth……..  But Major Issues……….  Liquidity challenges  Slow capacity recovery  Low output/wage equilibrium  Low savings and investment  Unemployment & Poverty Introduction

5. 5 Inflation fundamentals improving............. Introduction

6. Introduction Inflation fundamentals…….Uncertainty

7. Economic Recovery…… Economic Recovery…… GDP By Industry (US$m)201020112012 Agriculture126614621703 Mining91911981593 Manufacturing98110251077 Electricity & Water269275284 Construction929496 Finance & Insurance241248257 Real Estate122125128 Distribution & Tourism129013281381 Transport & Communication717731749 Public Administration888991 Education167170174 Health878990 Domestic Services646566 Other Services348355363 Less Imputed Bank charges-59-57-56 GDP at factor cost659271977996 Net taxes on production000 GDP at basic prices659271977996 Net taxes on products214227243 Real GDP at market prices680674258239 Real GDP (yoy%)8.0%9.1%11.0% Nominal GDP at market prices699980169337 Nominal GDP (yoy%)12.0%14.5%16.5%

8. Economic Recovery………… Economic Recovery………… Gross Domestic Product by Industry at Constant Prices (US$ M) 201020112012 Agriculture34.015.516.5 Mining44.030.333.0 Manufacturing3.54.55.0 Electricity & Water2.02.43.0 Construction1.21.82.4 Finance & Insurance2.23.03.3 Real Estate1.32.02.2 Distribution & Tourism2.53.04.0 Transport & Communication1.22.02.5 Public Administration1.5 Education1.31.72.3 Health2.21.82.2 Domestic Services2.11.62.3 Other Services1.82.02.2 Less Imputed Bank charges-3.3 -2.5 GDP at factor cost11.99.211.1 Net taxes on production-2.0 GDP at basic prices8.09.211.1 Net taxes on products5.06.06.7 GDP at market prices (yoy%)8.09.111.0

9. Economic Recovery………..  Assumptions: Optimistic Scenario Accelerated mining sector and agriculture growth Indigenization and empowerment framework on the basis of stakeholder consensus Progress on Debt and Arrears Clearance strategy Sustained GPA Progress : Political and Macroeconomic stability New investment in infrastructure: energy, power and ICT Structural reforms including privatization Investment in Education, Health; New ICT; R&D

10. Banking Sector Deposits Banking Sector Deposits Growth in deposits from US$1,4 bn in Dec-09 to US$2,6 bn by April 2011 Growth in deposits from US$1,4 bn in Dec-09 to US$2,6 bn by April 2011

11. Liquidity Challenges…… Deposits Growth…… Liquidity Challenges…… Deposits Growth……

12. Money Supply Forecasts…. Money Supply Forecasts…. May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-11 2,692,466 2,786,702 2,884,237 2,985,185 3,089,667 3,197,805 3,309,728 3,425,569 2,666,452 2,733,113 2,801,441 2,871,477 2,943,264 3,016,846 3,092,267 3,169,573

13. Liquidity Challenges…..  Economy faces liquidity Challenges  Slow deposit Growth @Us$2.6 billion (April)  Mainly short term deposits (90%)  Financial intermediation growing slowly  Two Sources of Liquidity (Multicurrency)  Exports  Credit Lines  Economy Requires significant capital flows  Capitalization of firms  Working capital financing  New Equipment financing  New Projects (e.g Energy/infrastructure)

14. National Imperatives  National Imperatives:  Economic Growth  Job creation and poverty alleviation  Investment in Education, Health, Research & Development  New (wealth) value creation  Broad based economic transformation  Equity, Fairness & Opportunity For All  SMEs growth & transformation  Youth & Gender mainstreaming……  Financial intermediation is at the heart of economic growth……  Economies grow due to investment/FDI...  China, India, Peru, South Korea, Taiwan……

15. National Imperatives  To Achieve National Imperatives:  Promote export growth  Secure Credit Lines  Engagement of International Community  External Debt & Arrears Resolution  Address Banking sector Vulnerabilities  Capacitating Central Bank  Lender of Last Resort Function  Domestic stakeholder engagement  An All stakeholder approach  Govt, Business & Labour (Policy Consensus)  Deal with Uncertainty  Political & Policy Issues

16. Why Investment is Critical Economic Growth & Poverty Reduction Economic Growth & Poverty Reduction Economic Growth & Improving living standards Economic Growth & Improving living standards Economic growth & national development Economic growth & national development Economic development & long term stability Economic development & long term stability Economic Growth & Social cohesion Economic Growth & Social cohesion Greece, Tunisia, Egypt, Jordan, Yemen….. Greece, Tunisia, Egypt, Jordan, Yemen…..

17. Ghana and Malaysia Both Were British Colonies Both Were British Colonies Both got independence same year Both got independence same year Both had similar per capita levels in 1957 Both had similar per capita levels in 1957 In 2010, Malaysia’s per capita is 10 times higher In 2010, Malaysia’s per capita is 10 times higher What accounts for the difference? What accounts for the difference?

18. Ghana and Malaysia: 1957

19. Ghana and Malaysia: 2009

20. Ghana and Malaysia MalaysiaGhana Population (millions) 20002319 Percent of population below the national poverty line1633 Infant Mortality Rates (per 1000)865 Adult Illiteracy1330 Agric share of GDP (%)1436 Paved road as % of total (1998)7524 Per 1,000 people: Telephone Main Lines (1998)1988 Personal computers (1998)592 No. of listed domestic companies (1999)75722 Foreign Direct Investment in US$ million (1999)1,55317 Exports of Goods & Services as % of GDP (1999)12432 CPI Inflation Rate (2001)1.433 Sources: World Bank, World Development Report 2000/2001 & 2002 issues; Statistics Dept., Malaysia

21. Per Capita Comparative Analysis: 1960

22. Per Capita Comparative Analysis: 2009

23. Seven Lessons From China Specific Well Defined Economic objectives Specific Well Defined Economic objectives Learning from own Mistakes Learning from own Mistakes Understanding the Global dynamics Understanding the Global dynamics Far sightedness/ Focus on Long term Far sightedness/ Focus on Long term Mastery of International Engagement Mastery of International Engagement Investment in Education, Health, R& D Investment in Education, Health, R& D Nationalism balanced with Global Imperatives Nationalism balanced with Global Imperatives

24. Gold Prices….. A window of opportunity

25. WAY FORWARD  Improving the Investment Environment Improving the overall investment environment is critical for FDI. Improving the overall investment environment is critical for FDI. Zimbabwe is presently viewed as a high risk investment destination. Zimbabwe is presently viewed as a high risk investment destination. Agreed Framework for IEE Agreed Framework for IEE Stakeholder Consensus Stakeholder Consensus

26. THANK YOU