Zimbabwe's capital city plans $100mn housing bond

Zimbabwe's capital city, Harare, is embarking on a mission to tap into the capital markets to raise $100 million this year to address the housing shortage in the region. In a recent interview with Tadiwa Mangwengwende, an economist at the Women's University in Africa, the challenges and prospects of this ambitious housing bond were discussed. While the move is aimed at alleviating the housing crisis in Harare, there are concerns and uncertainties surrounding the success of this venture. One of the key issues highlighted by Mangwengwende is the skepticism that may accompany investor interest in the housing bond. Despite positive real interest rates driven by low inflation levels in the country, questions loom over the financing and sustainability of the bond. The reliance on capital markets for such a substantial sum raises doubts about the practicality of repayment and the long-term implications. Moreover, the recent introduction of bond notes in Zimbabwe has added another layer of complexity to the economic landscape. The potential impact of bond notes on inflation and exchange rates poses challenges for maintaining stable real interest rates. As investors navigate the uncertainties surrounding bond notes and parallel exchanges, the full subscription of the housing bond may face resistance. Inflation remains a critical concern for Zimbabwe, with contrasting figures and forecasts contributing to the economic uncertainty. While current inflation rates are relatively low, the looming risks associated with bond notes and import-dependency could lead to a surge in inflation levels. Mangwengwende emphasized the importance of considering the widening gap between bond notes and the US dollar in evaluating the future inflation trajectory. The sustainability of government financing initiatives, such as the issuance of agriculture bills, is also under scrutiny. The reliance on debt to support recurrent expenditure raises questions about the economy's ability to absorb additional financial burdens. Without complementary measures and austerity strategies in place, the long-term viability of financing mechanisms remains uncertain. The employment landscape in Zimbabwe presents another challenge, with reports indicating a potential significant reduction in the workforce. Job creation struggles to keep pace with population growth, leading to stagnant wages and rising unemployment rates. The combination of slow job growth and fixed wages contributes to the economic challenges faced by Zimbabwe. As Harare ventures into the capital markets to secure funding for housing development, the road ahead is fraught with obstacles. The success of the $100 million housing bond hinges on addressing the skepticism of investors, navigating the complexities of inflation and exchange rates, and implementing sustainable economic policies to support long-term growth. The collaboration between government, private sector, and economic experts will be crucial in steering Harare towards a more stable and prosperous future.