Zimbabwe: economy--that sinking feeling.
Despite trying to put a brave face on it, Zimbabwe's finance minister, Herbert Murerwa could not disguise the fact that 2003 had been an annus horriblis for the country's economy when he presented the 2004 budget. He admitted that the economy was in deep crisis. "The country has once again experienced another year of severe socio-economic hardships," he said.
"The economy," he stated, "is estimated to contract by 13.2% this year and inflation to peak at about 600% by December (2003). Inflation will initially rise to above 700% during the first quarter of 2004 due to the momentum it has gathered this year. However, it is my projection that inflation will start to dissipate thereafter in response to both monetary and fiscal measures to be implemented in 2004."
This is scant comfort to a nation that has seen its living standards plummet over such a short period of time. "Never have so many been so disappointed by so few" was the general verdict of the population. For once, the government seemed to be on the same wavelength as the people when Murerwa said: "These hardships have manifested themselves in rising inflation, erosion of real incomes, critical foreign currency shortages, decline in savings and investment, capacity utilisation, company closures and high unemployment. The HIV/Aids pandemic has compounded the situation."
Manufacturing output has declined by close to 80%; unemployment has reached a frightening 70%; foreign currency is nowhere to be found; 800 companies have been forced to close shop and the political crisis looks far from over.
State-sponsored and often violent invasions of farms and the government's own chaotic land reforms have brought Zimbab-we's commercial agriculture to a virtual standstill.
With more than half of the country's commercial farms, including some of its largest tobacco farms, now gazetted for acquisition by the government under its land reforms, tobacco industry experts say Zimbabwe could soon lose its status as the world's third largest tobacco exporter.
The disruptions of the land reforms to farming have already resulted in serious food shortages because farmers have been unable to plant enough of the staple maize and wheat.
As well as the reduced output caused by the farm disturbances, earnings of tobacco farmers on the Zimbabwe auction floors were also hit hard by the distorted exchange rate.
Receipts from the tourism sector have shrunk 10-fold in a space of three years following the introduction of government's fast-track land reform programme.
Zimbabwe Council for Tourism president, Shingi Munyeza said receipts from the sector, which at one point was lauded as the fastest growth industry in the country, had shrivelled from $700m in 1999 to $70m in 2002.
"The tourism industry generated about $250m but if we are to take into account the downstream activities, it amounted to $700m," Munyeza said. "Last year the sector only produced $70m."
Munyeza, who is also the chief executive officer of Zimbabwe's leading hotel chain, the Zimbabwe Leisure Group, said government "should be addressing the impact of the land reform programme on the tourism industry." He said it was high time the land acquisition process was completed.
The land programme started in earnest in 2000, and resulted in about 4,000 white commercial farmers being forced off their land. Hundreds--both farmers and workers--lost their lives and thousands were seriously injured as veterans of Zimbabwe's 1970s war of liberation and ruling Zanu PF party supporters were unleashed on commercial farms to wage a brutal war.
The tourism sector has been harmed by the negative publicity emanating from government's handling of the controversial issue, abuse of the judiciary as well as interference with press freedom. The sector has slipped from being a major foreign currency earner as tourist arrivals have shrunk drastically on the back of adverse publicity associated with the perceived breakdown in the rule of law.
A FINANCIAL DISASTER
While citizens will want to forget the horrendous year for its economic and social decay, President Robert Mugabe and his team might want to do so for other reasons. Inflation has continued to soar from Finance Minister Herbert Murerwa's conservative earlier prediction of 96% to a record 525.8% as of October, 2003.
Economic and social conditions in Zimbabwe have indeed deteriorated progressively over the past four years. Real output has dropped by one third and welfare and poverty indicators have worsened.
Severe food shortages have necessitated massive food imports and donor assistance as two thirds of the population required food aid in 2002/03. The country's balance of payments has been under severe pressure since 1999, when Zimbabwe began to accumulate payments arrears. There is little productive investment in the economy and there are reports of significant capital flight and emigration of skilled labour.
In its latest report on Zimbabwe, the IMF says: "The economic crisis reflects to a large extent inappropriate economic policies: loose fiscal and monetary policies, the maintenance of a fixed exchange rate in an environment of rising inflation. Increased regulations and government intervention have driven economic activity underground and contributed to the chronic shortages of goods and foreign exchange. The impact of these policies has been exacerbated by the fast-track land reform programme, recurring droughts and the HIV/Aids pandemic."
The IMF also said that investor confidence had been eroded by concerns over political developments, weak governance and corruption, problems related to the implementation of the government's land reform programme, the push for an increased indigenisation of the business sector, and the selective enforcement of regulations.
World Bank executive director responsible for Zimbabwe, Louis Kasekende said the country seriously needed to "change for it to progress". He said government and business needed each other and should stop mistrusting each other.
Kasekende said organisations such as the 150-member National Economic Consultative Forum (NECF) should not be gatherings merely to "talk about problems" but "gatherings for action".
"These gatherings should thrash issues out," he maintained. "What you need at the moment is action, action, and more action." He added that the government needed to take urgent action to arrest the economic decline, bring inflation under control and return the economy to a sustainable growth path.
Analysts said decisive steps to restore confidence in government's economic policies, including enhanced governance and transparency and respect for the rule of law and broad ownership of the reform process would be key to revamping productive investment, attracting needed foreign direct investment, and regaining the support of foreign creditors and donors.
Presenting a Z$7.75 trillion budget to parliament, Murerwa said: "In order to arrest rising inflation and reduce it initially to double-digit levels and ultimately to single digit figures, government will rigorously implement fiscal and monetary stabilisation measures."
He said he anticipated nominal gross domestic product (GDP) for 2004 to be Z$24.63 trillion. "Given a revenue of GDP ratio of 28%, revenues will be about Z$6.9 trillion. Total expenditures will amount to Z$8.74 trillion giving a deficit of $1.85 trillion, which translates, to 7.5% of GDP--a standstill position compared to 2003 in the absence of significant international inflows."
However, the opposition Movement for Democratic Change (MDC) said Murerwa's budget was a "financial planning disaster". "Murerwa's budget is an indictment of Zanu PF's rule. It shows beyond doubt that this government has failed. It is a populist budget, underpinned by dishonesty and hypocrisy," said lawyer and human rights advocate Tendai Biti. "It is dishonest in that it fails to address three fundamental issues: exchange rate, inflation and negative real interest rates."
The MDC said the budget was cloaked in secrecy to conceal the depth of the economic crisis. It said the budget was also tinged with deceitful political statements and misrepresentations
Murerwa in his Supplementary Budget early last year said resolving the Zimbabwe crisis would involve some pain. Citizens wonder just how much more pain they still have to experience.
|Printer friendly Cite/link Email Feedback|
|Date:||Jan 1, 2004|
|Previous Article:||Zambia: thinking the unthinkable.|
|Next Article:||Nigeria: new term, new approach?|