MTP seeks to entrench gains

the Short-Term Economic Recovery Programme (STERP) and the three-year macro-economic policy framework.

Key targets over the five-year term of the MTP include single-digit inflation, annual growth of 7 percent, current account deficit of less than 5 percent of Gross Domestic Product and job creation of 6 percent per annum.
The plan also envisages foreign exchange reserves of at least three months import cover by 2015, savings of 20 percent of GDP by 2015 and budget deficit in line with the Sadc benchmark of less than 5 percent of GDP by 2015.

Through STERP and the three-year macroeconomic framework, Government has already kept inflation under single-digit levels, prices fell, achieved successive annual economic growth and raised capacity utilisation.
Industrial capacity utilisation, currently averaging 46 percent, has risen from an average of 10 percent at the height of Zimbabwe’s economic meltdown.

As such, the economy grew by 4,5 percent in 2009 and 8,1 percent last year.
Finance Minister Tendai Biti has projected the economy to grow by 9,3 percent this year on the back of stronger performance in agriculture and mining sectors. But economic analysts said the major threat to the MTP’s success remains failure to address basic long-standing issues such as power shortages and unprofitable parastatals.

They also stressed the MTP would only be effective as far as the extent to it being implemented, as previous policy failure was attributed to lack of implementation.
There has been considerable success in reining in rampaging inflation through adoption of the multi-currency system, as prices increased marginally. Annual inflation peaked at over 231 million percent in mid-2008 as prices of goods and services ran wild.

But inflation plunged to sub-zero levels in December 2010, the first time it was measured in the multi-currency economy.
Now, Government’s Medium Term Plan – scheduled to run from 2011 to 2015 – seeks to restrict annual inflation rate within the 6 percent band.
Economic analysts believe the country has achieved stability and efforts should be aimed at entrenching this and making sure this becomes sustainable.

With annual inflation of under 4 percent and the multi-currency regime expected to run the course of the new economic blueprint, restricting annual inflation under the 6 percent buffer should be fairly easy for Government.
BancABC chief economist Mr James Wadi said the Government should come up with a well-thought out implementation matrix to avoid challenges in the past.

“We do not want to look back and say what has transpired. Government needs to identify issues that are measurable so that we can, at some point, say what were the targets and what did we do (measuring success),” he said.

He, however, stressed the need to ensure adequate supply of electricity. Mr Wadi said power deficits had far-reaching effects on the broader economy.
“Such growth enablers continue to stifle other wheels of the economy. Issues that have been on the table for a long time have not been implemented in terms of targets for power generation capacity,” said Mr Wadi.

He also cited Government’s failure to address key structural issues such as transforming loss-making parastatals, as factors that could constrain the MTP.
But he was upbeat economic growth targets espoused in the MTP were achievable if Government had clear plans on how to derive the most from potential growth areas such as the diamonds in Chiadzwa and Hippo Valley Estates.

Mr Wadi added that the success of the MTP in entrenching and sustaining macro-economic growth also depended on availability of affordable long-term funding.
Industry needs fresh capital after a decade in financial distress.

Zimbabwe National Chamber of Commerce immediate past president Mr Trust Chikohora said Government needed guiding policy in the first place. He said STERP had run its course while the three-year macro-economic policy framework launched by Minister Biti last year was only a short-term policy.
“After achieving stability the Government needed a long-term policy to guide it on how to proceed and how it will proceed based on the policy,” he said.

This was critical, said Mr Chikohora, as it gives investors, multinational lenders and business a clear picture on which direction the economy will take. Investors’ confidence will be enhanced, as the MTP emphasises the role of the private sector in economic turnaround, growth and development, which effectively means the economy would follow a market-based model.
Mr Chikohora said some of the major strengths of the MTP in restoring stability included its broad-based approach to growth, the inclusivity of ideas from the stakeholders and political parties in Government.

But he pointed out the effectiveness of the US$9 billion economic blueprint also lay in Government’s success in attracting foreign direct investment.

However, this will hinge on Government’s success in dealing with sovereign debt, which stands at US$7 billion and has been blocking lines of credit. He said certain targets, such as reducing the budget deficit, depended on significant FDI, which would result in job creation and increased Government revenue.
But analysts contend achieving targeted savings and investment ratios, reducing current account deficits and halving poverty by 2015 remains a huge challenge.
A significant number of targets in the MTP could be achieved, but challenges may be encountered in accounting achievements if there is no clear implementation and monitoring systems to measure success or failure.