THE year 2005 has ended on a very low note and the current economic challenges will spill into the New Year as the government has failed to sustain the economic recovery hinted at the start of t
he year by low inflation, business leaders and economists say.
They said claims by the Minister of Finance Herbert Murerwa and central bank governor Gideon Gono that the economy was on a recovery path have failed to materialise.
Confederation of Zimbabwe Industries (CZI) president Pattison Sithole said that at the beginning of 2005 they were optimistic that the economy would improve.
“We started off with a bit of optimism because inflation was very low and on the downward trend, products were available and the foreign currency shortage was not so severe,” he said.
Sithole, who is also the chief executive of Zimbabwe Sugar Refineries Corporation (ZSR), said as the year progressed inflation started picking up and shortages of products began.
Zimbabwe’s inflation, which declined to 123% in January, has since risen sharply throughout the year. The Central Statistical Office recently announced a November inflation rate of 502%, further dampening Zimbabweans’ hopes of the much-touted economic turnaround.
In October the inflation rate was 411% after increasing by 51,2 percentage points from September’s 359,8%.
“We hoped that the trend of economic recovery would be sustained but unfortunately it was not,” Sithole said.
He added that the economic challenges that the business community faced during the year would continue in 2006.
“A lot of work still needs to be done from all angles,” Sithole said.
He said the major task that the authorities should do was to boost foreign currency earnings and that this could only be achieved by increasing production.
“You cannot solve the foreign currency problem without increasing production and sorting out the parastatals.”
Sithole said there should be a more coordinated approach in reviving agriculture and resource allocation.
He added that the government should also mend its relations with the international community and pursue avenues of getting significant foreign direct investment to augment inflows from the Diaspora.
“There were very low levels of investment throughout the year,” he said.
Economic analyst John Robertson said the year 2005 has had a bad ending, with higher levels of unemployment and declining standards of living.
He said the perpetual rise of inflation, interest rates and deterioration of other economic fundamentals would spill into the New Year unless government makes better political decisions.
“The decline in the agricultural sector has killed the country’s manufacturing and commercial sectors,” Robertson said.
He said Zimbabwe did not receive significant investment this year.
“Under the current policies no investor would give the country a second look,” he said.
According to a report titled Doing Business in 2006, recently compiled by the Investment Climate Department of the World Bank, Zimbabwe has been rated as one of the most difficult country to do business in due to bureaucracy, corruption-prone systems and high start-up costs.
Zimbabwe was ranked 126 out of 155 countries that were surveyed to ascertain the investment climate.
There is also a contrast between Murerwa’s targets and the situation on the ground.
In his 2005 national budget statement, he had predicted that the agricultural sector would improve by 28%, only for the same sector to decline by -12,8% in his 2006 national budget statement.
Gono, who had predicted that the inflation rate would be between 280% and 300% by the end of the year has also been proved wrong as the rate has now ballooned to 502% and is expected to hit 600% by February.