It would require a growth rate of 27% to build the current GDP to the levels envisaged by the former finance minister.
ALTHOUGH Zimbabwe desperately needs an economic turnaround, the MDC Alliance manifesto ahead of next month’s general elections projecting the country’s US$15 billion economy can rapidly grow at a sustained rate of 10% annually to US$100 billion by 2029 is overambitious.
By Tinashe Kairiza
As the battle for the hearts and minds of the electorate intensifies, MDC Alliance presidential candidate Nelson Chamisa last week promised if he wins, his government would grow Zimbabwe’s fragile economy at a blistering pace of 10% annually to US$46 billion by 2026, before peaking at US$100 billion in 2029.
While the economy registered double digit recovery rates after the formation of the inclusive government in 2009, economists and analysts say sustaining this in the short to medium term would be impractical due to both internal and external factors.
The MDC Alliance growth projections are anchored on “rebasing the economy” through re-evaluating the country’s Gross Domestic Product (GDP) and consumer price index. The strategy is also based on changing the index year in respect of which GDP is calculated from the hyperinflationary years when economic data was compromised.
Zimbabwe’s weak economy, saddled by a huge external debt stock of US$12 billion, widening trade deficit of nearly US$1 billion in the first four months of this year, a shrinking manufacturing base and an unemployment burden of about 95%, spectacularly collapsed during the 37 years of former president Robert Mugabe’s ruinous rule. Coupled to that, the economy is also characterised by an acute cash crisis, liquidity crunch and debilitating foreign currency shortages.
By 1997, the economy’s free-fall accelerated after Mugabe handed out ZW$50 000 in pensions and gratuities to over 50 000 war veterans outside the budget before embarking on chaotic agrarian reforms in 2000 which brought the southern African country to its knees.
On November 14 of the same year, a day referred to as Black Friday, the now defunct Zimbabwe dollar crashed 71,5% in value against the United States dollar and, according to economists, that marked the beginning of the country’s downward spiral.
By 2008, the economy had virtually imploded, with inflation peaking to 231 000%, largely fuelled by Mugabe’s unsustainable spending which was punctuated by unrestrained printing of the local dollar, which was to be later demonitised.
Briefly, the economic free-fall was arrested in 2009, when Mugabe was forced to share power with the late MDC-T leader Morgan Tsvangirai who succumbed to cancer of the colon in February. The period of the inclusive government between 2009 and 2013, saw the economy recording modest growth, with inflation slowing to single digit figures largely due to exchange rate stabilisation after the adoption of a basket of stable currencies.
The MDC Alliance has claimed credit for the brief spell of relative economic and political stability that Zimbabwe enjoyed during the five-year tenure of the inclusive government which was brokered by the Southern African Development Community and former South African president Thabo Mbeki.
Ahead of the make-or-break elections next month, the MDC Alliance has pledged to roll out an ambitious US$100 billion economic vision, limit inflation to 6%, attracting foreign direct investment (FDI) exceeding 25% of GDP and create a stable macroeconomic environment, among other key determinants.
However, ZimFact, an independent fact-checking think-tank, says scientifically it would be impossible for Zimbabwe to expand its economy to US$100 billion over the next eight years, even at the desired 10% annual growth rate proposed by the MDC Alliance. Employing two economics laws, namely the rule of 70 and the geometrical growth calculation formula: Yt=Y0 (1+r) t, ZimFact says that judging by the MDC Alliance 10% annual projected growth rate, Zimbabwe’s economy can only grow between US$28 billion and US$30 billion over the next eight years, far below the US$100 billion mark forecast by the opposition. According to the geometrical growth calculation formula, Y0 denotes the value of the process at time 0 and Yt stands for the value at time.
“Zimbabwe’s official 2018 budget statement, presented on December 7, 2017, estimates that the country’s real gross domestic product was US$14, 5 billion. It projected real GDP to reach US$15,2 billion this year,” wrote ZimFact.
“(Tendai) Biti’s claim that an MDC Alliance would build a US$100 billion economy in eight years at an annual rate of 8% is premised on erroneous calculations. It would require a growth rate of 27% to build the current GDP to the levels envisaged by the former finance minister. Alternatively, it would take 25 years at 8% growth, for Zimbabwe’s current GDP to reach US$100 billion.”
Social commentator Maxwell Saungweme said although the MDC Alliance manifesto — dubbed the Sustainable and Modernisation Agenda for Real Transformation — was better than that of Zanu PF launched last month in terms of being realistic, the blueprint’s lofty US$100 billion economy target in less than a decade target was a pie in the sky.
With Zimbabwe requiring at least US$15 billion over the next five years to revamp its dilapidated infrastructure, Saungweme says the Smart policy blueprint does not take into account the myriad of challenges currently besetting the local economy.
“That manifesto is a good document on the surface. Its infrastructure strategy hinges on Private Public Partnerships and mechanisms such as Build Operate and Transfer which normally needs 10 to 25 years to deliver and transfer the infrastructure. It will be selling a dummy to people to try and create a feeling that the infrastructure will be revamped quickly through PPPs. Building a US$46 billion economy in a matter of less than 10 years in a country that has so many economic bottlenecks is more of just political rhetoric than real economics. So those figures are misleading,” Saungweme said.
Economist and University of Zimbabwe lecturer Nyasha Kaseke said it would be “difficult” for Zimbabwe’s US$15 billion economy to multiply three fold, over the next eight years, as envisaged by the MDC Alliance.
“These promises are not practical given the nature of our economy. It is difficult for Zimbabwe’s economy to triple over the next eight years,” he said.