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Golden Sibanda
Zimbabwe is poised to register a significant progress on its economic reform programme, largely benefiting from improved political governance and the new dispensation’s efforts to re-engage the international community, a top global economic think tank has said.
Fitch Solutions, a globally acclaimed research firm that normally generates scathing reports on Zimbabwe — said Harare’s efforts to turn around the economy battered by nearly two decades long meltdown would benefit from reforms under the new administration.
Since taking over power from long time ruler, Robert Mugabe in November 2017, President Mnangagwa has vowed to institute far reaching economic reforms aimed at creating an environment that attracts foreign direct investment (FDI).
Fitch Solutions, a global economic research and advisory firm based in the United Kingdom, said in its latest release on risk reports on 43 African countries, Zimbabwe now possessed upside potential for fiscal and monetary policy normalisation.
Fitch believes Zimbabwe has greater opportunity to implement key reforms to rebuild the economy after decades of unorthodox policies and illegal western sanctions.
Notwithstanding the adverse effects of drought, which will hurt one of its key sectors (agriculture), the economy is projected to register 3 percent growth driven by minerals, tobacco and the services sector. Finance Minister Mthuli Ncube is on record saying Zimbabwe will be among world’s fastest growing economies in two years.
“With the new Government, there is significant upside potential for greater fiscal and monetary policy normalisation, where the latter is intrinsically tied to improved governance and meaningful re-engagement with multilateral lenders and the international community in the years ahead,” Fitch said.
The Government has since embarked on extensive reforms targeting, among others, fiscal consolidation and reducing the perennial problem of budget deficits. Broadly, the Government envisages widespread policy reform initiatives to stimulate domestic production, export driven growth and rebuilding and transforming the economy to Upper Middle-Income status by 2030.
Through the Transitional Stabilisation Programme, the Government targets to strengthen fiscal responsibility and management of the Government expenditures and create an appropriate environment for increased budget development expenditures.
In that respect — through the TSP that will run until 2022 — the Government envisages lowering the national budget deficit from the current level of 9 percent to averages of 3 percent by 2020.
Zimbabwe’s Gross Domestic Product (GDP) halved over the decade to 2008 due to years of economic isolation, unorthodox policy-making and onerous western sanctions after the country took back land from minority white farmers.
These factors underpinned the country’s unfriendly investment environment in the Mugabe-era, especially since the turn of the century, and have contributed to Zimbabwe’s multi-decade economic downturn.
Fitch said that despite the political reconfiguration that has taken place since November 2017, the economic operating environment in Zimbabwe might remain challenging, at least over the short-medium term.
The domestic economy remains vulnerable to risk factors, according to the UK research firm, such as adverse weather conditions and commodity price weakness, slow industrial productivity and forex challenges.
These risks are compounded by internal factors such as the country’s over dependency on primary sector exports, high import reliance, endemic corruption, high financing costs and a yawning infrastructure deficit.
These factors, combined with ‘rigid’ labour market regulations, significantly lower Zimbabwe’s competitiveness relative to its Southern African neighbours such as Namibia, Botswana and, to a greater extent, South Africa.
In order to attain the desired economic growth rate trajectory, the Government has committed to undertake other significant reforms that include improving the ease of doing business, improving competitiveness, and opening the country to international investors and financiers.
In terms of rule of law and property rights, the Government indicated that these would be reinforced by governance reforms, fairness in application of the rule of law, as well as upholding of human and property rights.
Further, reforms will focus on reducing corruption within public entities and institutions, aligning the country’s laws to the Constitution, public enterprise restructuring, privatisation and reorganisation among other far-reaching initiatives.
Bongani Ndlovu