The International Monetary Fund (IMF) has revised Zimbabwe’s 2017 growth forecast upwards, saying the new projections are anchored on the agricultural and mining sectors. The farming sector registered an uptick this year, mainly as a result of a good rainfall season. The above-average harvest this year has boosted food security, while production in the mining sector has been ramped up.
According to the IMF’s October 2017 World Economic Outlook, entitled Seeking Sustainable Growth — Short-Term Recovery, Long Term Challenges, Zimbabwe’s economy is now expected to grow by 2,8%, up from earlier projections of 2%. However, this is where the good news ends. With climate experts forecasting below-normal rainfall in the 2017-2018 summer cropping season, Zimbabwe’s food security could prove short-lived. In line with this reality, the IMF sees Zimbabwe’s economy shrinking considerably next year.
“Zimbabwe’s medium-term growth is expected to recede, and is projected to decline to 0,8% next year and a negative 0,9% come 2022,” says the multilateral lender.
The IMF’s growth projections are, however, still below what the Zimbabwean government expects to achieve this year.
In March this year, government revised its 2017 GDP growth rate to 3,7% from 1,7%, largely on the back of a bumper maize harvest. The IMF is, however, forecasting the country’s growth prospects to go down in coming years.
Zimbabwe’s economic fundamentals remain perilous. Import cover is down to barely one day. This year, total national revenue is not projected to surpass US$3,5 billion, compared to expenditure of US$6 billion. This means the economy is expected to run a budget deficit exceeding US$2 billion this year. At more than 30%, Zimbabwe’s fiscal deficit is way above Southern Africa’s average of about 6 percent. The widening fiscal deficit — at a time when foreign direct investment inflows are slowing down to a trickle — means the country’s capacity to support policies which are necessary for inclusive growth, including spending on public infrastructure, health, and education is grossly undermined. A few weeks ago, foreign currency bottlenecks caused fuel shortages, sparking fears of a dramatic return to the 2008 hyperinflation which decimated life savings and impoverished three quarters of the population.
Catastrophe was averted when officials from the Egypt-based African Import and Export bank (Afreximbank) noticed the long fuel queues in Harare and promptly offered Zimbabwe’s bankrupt government a US$600 million “stabilisation” package. The fuel queues have disappeared, but prices of some basic food commodities have been shooting up and the impoverished majority remains restless.
In the capital city, street vendors are locked in running battles with police, resisting President Robert Mugabe’s directive to stop selling wares in the open. Mugabe’s government does not seem to realise that haphazard street vending is a telling symptom of policy failure.
The imploding economy, coupled with internecine factional wars within Zanu PF, Mugabe’s advanced age and failing health, mean that his continued stay in office will increasingly become a source of risk and instability for the troubled economy.