Correct Policies Key To Economic Revival

THE signing of a power-sharing agreement between the country’s three main political parties last week raised hopes for the revival of one of the world’s fastest shrinking economies.

 

President Robert Mugabe and the leaders of the two formations of the MDC –– Morgan Tsvangirai and Arthur Mutambara –– signed the pact at a colourful ceremony in the capital.

There were reports soon after the agreement was inked that the World Bank, the International Monetary Fund and other multilateral financial institutions were ready to assist Zimbabwe’s inclusive government stabilise the flagging economy.

The international financiers suspended financial and technical aid to Zimbabwe in 1998 citing poor economic policies.

Analysts this week said the country’s economic recovery could be achieved if the international community provides financial and technical assistance.

The assistance, the analysts argued, would only come if the new government formulates a specific recovery plan that contextualises the multi-dimensional causes of the current economic crisis and prescribes a solution.

The analysts dismissed repeated claims by Tsvangirai that the MDC “has the key” to unlock international finance, saying he had no capacity to have sanctions imposed by the United States, Britain and its European Union allies lifted.

Neither Zanu PF nor the MDC, the analysts argued, had the power to influence the policy decisions of the countries which imposed the embargoes.

“It is not Tsvangirai who holds the key to economic recovery in Zimbabwe, but a combination of sound policies and a different approach to governance that locates economic change in the realm of the actions of free thinking citizens and not objects of a benevolent state,” argued South African businessman Mutumwa Mawere.

“The thinking of state actors has to change and a new realisation has to dawn that it is not the state that holds the key to progress, but citizens pursuing their own self-interest. A country that does not respect the rule of law, or human and property rights has no one to blame than its leaders.”

He said Zimbabwe was in a quagmire and urgently needed access to capital markets, but insisted that external inputs could only assist if the environment in the country was conducive.

“Accordingly, the prospects of economic recovery are not good, least because of the threat of international support, but mainly because no one has yet taken responsibility for transforming a once vibrant and promising country into a basket case,” Mawere said.

“The people in government blame those that are and have never been in government for the collapse. The international community is also blamed for the free fall of the economy.”

Political commentator and law lecturer at the University of Kent at Canterbury in Britain, Alex Magaisa, said Tsvangirai was important to economic revival.

“Tsvangirai holds the (economic revival) key to the extent that his presence and power in government is more likely to receive favourable support from the international supporters,” he argued.

“But beyond that he will need to manage the resources prudently and efficiently if there is to be a measure of success. Receiving financial support is one thing; using it efficiently is another, totally different matter altogether.”

Magaisa said Zimbabwe would struggle to revive the economy without international support.

Magaisa said: “It is saddled with enormous debt and suffers from a massive shortage of foreign currency.

“It needs to access key international lines of credit to kick-start its economic revival programme.

But this is going to be a challenge given the global financial turmoil that is crippling the countries such as Britain and the America that could provide such assistance.”

Even economists are united that without international aid the country’s economy would continue to slide.

ZB Financial Holdings group economist Best Doroh said the prospects of recovering without international support were very slim given that in the past 10 years the country had created a huge gap in terms of foreign currency availability.

“Both our current account and capital account deficits have continued to widen, and thus our balance of payments position has remained poor,” Doroh said.

“The extent of the gap created by years of economic contraction certainly require major international support in order to restore macro-economic stability. Local financial resources will only supplement the external support.”

Economist and investment analyst Lance Mambondiani said the economic success of the new government would ultimately depend on the extent of co-operation it is able to secure from trade and industry, the farmers and the trade unions.

“It (new government) has also to persuade the people to accept a long, preferably five-year period of austerity so that the country, at present having one of the lowest savings rates in the world, is able to save more, invest more and employ more,” Mambondiani said.

He said the country’s new economic “managers” were confronted with a big task, which may take “forever if they fail to get international support”.

University of Zimbabwe economics professor Anthony Hawkins recently said it could take Zimbabwe 10 years to get the country back to where it was in the 1990s and 15 years to where it was in the 1980s if there were no consistent practical policies supported financially by the international community.

Independent economist John Robertson suggested that before Zimbabwe’s economy is revived, it is going to get worse.

“The new government has to prove that they deserve to be given lines of credit and international support as money alone will not solve our problems. We need policies that encourage more production, exports and attract investors,” said Robertson.

To immediately cushion the public against further suffering, the new government has been advised to accept funding by international organisations without conditions often associated with adjustment projects.

The analysts said one of the major problems with the previous government was lack of clarity and consistency in policy direction.

While President Mugabe famously rebuffed “bookish economics”, the country’s economic model has often been a confused blend of social equity and market economics.

“The fragility of the Zimbabwean economy requires an economic approach which is a judicious mix between the free markets approach and an entrepreneurial paternalist state to guide development,” Mambodiani suggested.

“Implementing these structural reforms should aim toward a competitive society that thrives on global trends, and putting the bubble economy completely behind us.”

He said restoring investors’ confidence should also be a major objective of the new government.

“Before we can attract foreign investment, the interest rate policy will have to be reassessed to attract sizable domestic investment,” Mambondiani added.

Doroh weighed in: “If there is stability in terms of the domestic macro-economic environment, and if our tariff structures are aligned to the those in the region, and if we remove a lot of the non-tariff barriers to trade then that’s a very good starting point in terms of improving trade with other countries.”

Magaisa said to improve trade Zimbabwe needs to create a more open and trustworthy political system.

“Zimbabwe has been shut off from international programmes that assist African countries trade-wise because of its repressive political system in the recent past. If that can change, I think Zimbabwe’s fortunes will be vastly improved,” he said

Magaisa said Zimbabwe needed to shift from its narrow, politically motivated Look East policy and be more open to other countries.

“The East itself it not necessarily charitable; it seeks to improve its own selfish interests, as does everyone else,” he said

“Zimbabwe should not be encumbered by a narrow policy that looks only to one regional block. Even the East itself trades more and more vigorously with the West so why should Zimbabwe take a narrow East-centred route?”

By Paul Nyakazeya

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