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‘Economic Revival Mammoth Task For New Government’

PRESIDENT Robert Mugabe and leaders of the two MDC formations, Morgan Tsvangirai and Arthur Mutambara, yesterday signed a power-sharing deal setting the agenda for long-term cooperation in resolving the country’s economic and political problems.

 

The came two months after the signing a Memorandum of Understanding between the three main political parties on July 21.

The stiffest challenge for any government that emerges from the power-sharing deal itself a “product of painful compromises”, is reviving an economy which has shrunk by 60% in a decade.

Article three of the power-sharing deal said the parties agreed “to give priority to the restoration of economic stability and growth in Zimbabwe”.

The agreement said the new government would lead the process of developing and implementing an economic recovery strategy and plan.

“To that end the parties are committed to working together on a full and comprehensive economic programme to resuscitate Zimbabwe’s economy, which will urgently address the issues of production, food security, poverty and unemployment and the challenges of high inflation, interest rates and exchange rates,” the agreement said.

President Mugabe said: “There are a lot of things in the deal that I did not like and still do not like. The same for him (Tsvangirai). We had to compromise on a number of issues for us to move forward and work together to build Zimbabwe, by Zimbabweans for Zimbabweans.”

Mutambara said: “We sit here in order for us to chart a new way, of political and economic prosperity. This will involve people who were once enemies but now working for the prosperity of Zimbabwe as one.”

Said Tsvangirai, “I have signed this agreement because I believe it represents the best opportunity for us to build a peaceful and prosperous democratic Zimbabwe. I sincerely acknowledge that if we put our heads together we can find a long-term solution for the country.”

But the task ahead of the leaders is enormous. Several companies have shut down, scaled down operations or relocated to neighbouring countries as the economic environment became ever more untenable.

The new government will inherit inefficient structures and institutions, a situation that might be difficult to undo. Nearly half of the country is in darkness every day.

Prices of basic goods and services are beyond the reach of many people.

The MDC is coming into a government which is virtually broke and heavily indebted with a foreign debt of US$4 billion as at March 31 this year, a domestic debt officially pegged at a conservative $79,6 million and a currency that has been revalued twice with 13 zeroes removed.

The manufacturing sector is said to be operating below 30% of installed capacity and food is not readily available on shop shelves as all major sectors of the economy are depressed.

The Zimbabwe dollar was trading above $450 to the United State dollar yesterday while the transfer rate was above $2 300. The maximum daily withdrawal from banks is $500 which is not enough to buy a loaf of bread.

The major task the new government faces is to restore the credibility and discipline of the Reserve Bank and in the financial sector as a whole.

The country’s Reserve Bank is said to be technically insolvent and has incurred losses in the region of US$2,5 billion through quasi-fiscal operations. The bank’s wings are expected to be clipped in the new government to focus on its real mandate of “controlling inflation and interest rates”.

In addition, more money is owed in US dollar terms to exporters, non-governmental organisations and individual foreign currency holders.

The agreement seeks to ensure that the 2008/2009 agricultural season is a success.

It also will “establish a National Economic Council, composed of representatives of the parties and of the following sectors — manufacturing, agriculture, mining, tourism, commerce, financial, labour and academia,” reads the agreement.

Inflation is officially said to be 11,2 million percent. Economic analysts said with such a high figure, money alone would not be enough to resuscitate Zimbabwe’s economy but consistent, realistic policies.

The revenue authority has reportedly been prejudiced of almost 60% of potential earnings which have been generated by the informal sector, which is not a recognised source of funds.

By Paul Nyakazeya

 

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