EDITORIAL COMMENT: Zim gaining praise for its successful economic transformation, growth

ZIMBABWE has been moving up the approval ratings of the World Bank since the initiation of a critical set of structural economic reforms was introduced by the Second Republic, now reaching the stage where it is regarded as one of Africa’s leaders in successful economic policy.

In its latest report on making industrialisation work in Africa, Zimbabwe hits high grades in most areas, although the World Bank would prefer a different policy to tariffs and import controls to push industrialisation.

But it acknowledges Zimbabwe’s constraints amid wholehearted support of industrialisation, seeing the differences as debate over the most effective ways of moving forward faster rather than something fundamental.

This general approval and recognition of the successful Second Republic measures to enhance growth, tame inflation and push exports should help Zimbabwe immensely. We need such good reports both in the process to sort out debt arrears, and then in the renewed access to low-interest development finance for infrastructure, a primary responsibility of the World Bank.

When a developing country is regarded as a good bet because it has been sorting out its economy and building faster economic development on sound principles, then obviously more investors and others will be interested.

The opinion of the World Bank counts for a lot when people make checks before sinking their money and doing business in Zimbabwe.

It has an authority that no one else can really match, and while some judgments and decisions can be argued, generally the World Bank gets it right.

The World Bank was very impressed that Zimbabwe is now among a handful of Sub-Saharan countries that runs a positive fiscal balance, meaning the Government spends less than it collects. Part of that comes from surpassing the generally conservative predictions of economic growth, so more income is taxed; part comes from Zimra honing its systems to make sure those supposed to pay tax and duties do pay them, and closing loopholes.

Credit also goes to the deliberate budget decisions to have unallocated funds available, so that when a cyclone hits, or a drought is worse than expected or some other emergency turns up, the cash is on hand to move swiftly.

Zimbabwe learnt the hard way that trying to use debt to make up budget deficits, at least for everything bar the revenue generating capital budget where the immediate extra inflow of revenue is enough to service and eliminate the debt, leads to serious problems. Wishful thinking is not sound economic policy.

That small positive balance and unallocated funds means that the Government was able to step in and slash taxes on petroleum fuels when the current global oil shocks suddenly arose. There is a bit of slack that could be                                            taken up.

This is just good planning and good budgeting. The Second Republic has been building its reputation on good planning and strict budgeting policies and controls.

The economic reforms culminated this year with local currency inflation finally tamed, with the annual rate at just 3,8 percent by February.

It might rise a bit with the petroleum price shocks, but no more than the US dollar inflation rate, since that rise would the result of global prices, not slackness in Zimbabwe.

The World Bank was also impressed by Zimbabwe’s commitment, now in progress for several years, to drive the structural transformation needed for industrialisation.

On the foundation of that necessary precondition, the Government has been able to be very active in use of industrial policy instruments to push for a proper and self-sustaining industrial policy.

Zimbabwe’s efforts to be more involved in the practical economic integration of the region and the continent were seen as vital, with the World Bank even suggesting some further commitments.

The acceleration of the African Continent Free Trade Area was seen as vital for the eventual faster growth of Africa, able to raise real incomes by 2035 across Africa by seven to nine percent.

That is before the real rises in incomes driven by economic growth based on sound policies; it is an extra boost.