Godfrey Marawanyika/ Chris Goko
ALTHOUGH Zimbabwe held its sixth parliamentary election yesterday, the Economist Intelligence Unit (EIU) has ruled out any immediate end to the country’s economic woes a
nd international isolation.
In its Zimbabwe at a glance: 2005-06 report, the EIU said that there will not be an immediate economic respite because of inconsistent policies such as that for the platinum sector that bars the holding of foreign currency accounts. This, the reports says, undermines confidence in the sector.
“It appears increasingly unlikely that the parliamentary election will lead to a resolution of the country’s ongoing economic crisis,” the report said.
“Even if they (elections) are endorsed by Sadc, we do not expect the EU or US to accept the results. In fact, if, as seems likely, the elections fail to resolve matters in Zimbabwe, the US and EU are likely to step up the pressure on the South African president, Thabo Mbeki, to try and find a solution to the impasse.”
Since 2002, Zimbabwe has been slapped with EU and US sanctions.
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Between 1999 and 2003 Zimbabwe has experienced a cumulative decline in real Gross Domestic Product of 28,4% although the government now feels that the economic decline has been arrested.
Last year, Acting Finance minister Herbert Murerwa anticipated that GDP for 2004 would decline 2,5% from the 8,5 % recorded in 2003.
Murerwa also said that he was expecting the economy would record a 3,5 to 5% positive growth rate this year.
Murerwa said agriculture, which contributes about 16% towards GDP, was expected to register a marginal decline of 3,3% last year but projected to grow by 28% this year.
Mining, which contributes about 4% of GDP is also projected to register a 7,5% growth this year, after posting an 11,6% drop last year.
But government expects the manufacturing sector, which contributes 18% to GDP, to decline by 8,5% in 2004.
The EIU said that only in 2006, as the government tries to improve economic management, will the budget deficit be brought slowly under control, at a forecast of 4,2% of GDP.
“As it has no access to international funding, the government will continue to fund the deficits from domestic sources, although the cost of this will rise as real interest rates become positive again in 2005/6,” the report said.
The report said that throughout 2004, it became apparent that central bank governor Gideon Gono was now the main “force” shaping overall economic policy in the country, although his position is still constrained by the views of President Mugabe.
“As a result, although Mr Gono will continue to push for changes, it is likely that there will be constant tinkering with the current exchange rate and interest rate policies rather than any fundamental reform,” the EIU report said.
“The key measures of progress with reform will be whether Mr Gono can convince Mr Mugabe of the need to make a major devaluation of the auction rate after the election and completely eliminate the dual interest rate.”
In an interview with a local paper, Gono this week said he was not tinkering with the auction system.
The system was introduced on January 12 last year by the central bank at the behest of industrialists.
The EIU said the economic decline is set to slow down in the second half of the year as the economy starts to “settle at a new equilibrium with a much lower level of income compared with the level prior to 2000”.