eBusiness Weekly
Tapiwanashe Mangwiro
Analysts have urged farmers and businesses to efficiently manage and monitor loans as they are the country’s gateway to the desired growth projections.
In the first half of 2023, loans were disbursed to the biggest sectors of the economy for production and revamping industry.
According to Zimnat Asset Management, loans in the period were mainly concentrated within agriculture and manufacturing sectors to boost their productivity.
“These loans were primarily used to import essential materials and equipment. Total banking sector loans surged to $10,19 trillion, up eightfold from $1,29 trillion in December 2022,” the report revealed.
Such an increase was driven by foreign currency-denominated loans, comprising 94 percent of the sector’s loans.
Agriculture received 17,48 percent of loans, manufacturing got 12,24 percent, and mining secured 11,78 percent, indicating a deliberate push to strengthen key sectors.
The deliberate allocation of loans to agriculture, manufacturing, and mining sectors aligns with their historical contributions to economic growth.
These sectors have the potential to drive GDP expansion, generate income, and create employment opportunities, which are crucial for overall economic growth.
Zimnat believes that allocating 17,48 percent of loans to the agriculture sector recognises its vital role as the economic backbone.
“This investment can boost production, food security, benefiting both livelihoods and industry. A stronger agriculture sector also positively ripples through the economy, supplying 60 percent of industrial raw materials and accounting for 40 percent of export earnings.
“However, the impending El Nino-induced drought poses a significant threat to agriculture, which receives substantial loan allocation. Reduced rainfall can lead to decreased agricultural output, affecting food security, rural livelihoods, and export earnings from the sector,” the asset management firm said.
This might put the projected economic growth of 5,3 percent in question.
Despite the recent exchange rate fluctuations, Reserve Bank of Zimbabwe Governor, Dr John Mangudya, recently said the country’s domestic economic outlook remains robust, with projected growth for 2023 upgraded to 5,3 percent from the initial forecast of 3,8 percent.
Zimnat added that; “Similarly, directing loans toward the manufacturing sector (12.24 percent) and mining sector (11,78 percent) is a strategic decision to bolster industries that contribute significantly to GDP growth. Manufacturing drives value addition and job creation, while the mining sector provides vital minerals for export.”
Economist, Gladys Shumbambiri, says investments in these sectors can lead to increased production capacity, job opportunities and the diversification of the economy.
“However, high inflation, at a year-on-year rate of 77,18 percent, can erode purchasing power and overall economic stability. It could impact investment decisions and affect economic growth prospects. This can hinder the intended positive effects of loans by increasing costs for businesses and consumers.
“Despite the augmented allocation of loans to strategic sectors, the realisation of the projected 5,3 percent economic growth remains uncertain, given the existing and anticipated challenges confronting the economy,” she said.
The success of achieving the projected growth depends on the effective management of loans, mitigation of drought impacts, inflation control measures, and other policy actions to stimulate economic activity.
Additionally, focusing on economic diversification can reduce dependency on specific sectors and provide resilience against external shocks.
