WHILE the International Monetary Fund (IMF) delegation, which was in the country for almost a month for its 2016 Article IV Consultations and the third and final review of a 15-month Staff-Monitored Program (SMP),said authorities met all quantitative targets and structural benchmarks, that will not fix our problems.
Zimbabwe Independent Comment
It is good, as the IMF said, that government has started developing a medium-term economic transformation programme in line with the broader reform agenda presented at the Lima meetings on its arrears clearance last year, but this is simply not the panacea to the county’s multifaceted problems.
Engaging the IMF and other global financial institutions as well the international community will help to pluck Zimbabwe out of isolation and enhance its chances of securing new funding, but it must be remembered an SMP does not entail financial assistance or endorsement by the IMF executive board.
Once the SMP is completed successfully—as an initial step toward reform and re-engagement with international partners—a comprehensive and ambitious economic transformation programme is needed to revive the Zimbabwean economy and to cement support among international partners.
Zimbabwe’s economic and financial conditions are deteriorating because of inadequate external inflows given the arrears situation, low commodity prices which have kept liquidity conditions tight, and an appreciating US dollar.
Growth has slowed, unemployment is rising and increasingly there is a shift in economic activity to the informal sector. The external position remains precarious with very low levels of international reserves, and the country is in debt distress. Risks to the outlook stem mainly from fiscal challenges, weak global commodity prices, severe drought conditions, and policy flip-flops amid political instability.
So Zimbabwe cannot pin its hopes of economic recovery on IMF engagement alone. Government must address underlying governance and structural problems. This implies leadership, policy and corruption issues.
First, Zimbabwe must resolve the intractable political question. It must conduct credible, free and fair elections. After that it must engage the international community to end isolation.
From there, there must be a focus on the economy and reforms. Of course, these issues are not mutually exclusive – they are intertwined.
But improving the business environment is critical. In particular, government needs to repeal the damaging indigenisation policy to attract both foreign and domestic investment. This will go a long way to unleash Zimbabwe’s growth potential. It must also resolve the issues title on land to make it bankable. Policy action is needed to deal with this.
Deepening reforms and creating a friendly business climate, while addressing governance issues is key. Piecemeal and disjointed measures like the current ones won’t change much. An overhaul of political and economic frameworks is what is needed to get Zimbabwe working again.