Economics of the next five years

As the economy was heading towards the General Elections on August 23, 2023, the Government through the Ministry of Finance and Economic Development announced a raft of measures in May 2023 that were instrumental in stabilising the rate of exchange and the prices of basic commodities in the country.

Some of the measures include, inter alia: the liberalisation of the importation of basic commodities regardless of the place of origin; mandatory payment of some taxes and duties in local currency as well as levies and fees; increasing the retention of domestic foreign currency sales to 100 percent; Treasury is now funding the Zimbabwe dollar component of the 25 percent export surrender requirement; and the introduction of a 1 percent tax on all foreign payments.

Over the years, the Government has tended to overspend in the period after the election while delivering on the promises made during campaigns and cutting spending a few months just before the election days.

This is somewhat referred to as the “political business cycle”.

It is highly likely that the Economics of the past five years will continue into President Mnangagwa’s new term in the country’s highest office. However, the focus will be diverted away from changing the legal recourse as the ruling party did not achieve a two-thirds majority in terms of legislators having registered 137 out of 210 constituencies.

As per the Constitution of Zimbabwe, President. Mnangagwa is now in his last term of office and Zimbabwe can benefit from having a sure last-term President for the first time.

The last term of office for a President is normally called the legacy term. This follows the notion that leaders feel more pressure to deliver results and leave office with a positive legacy.

The 2023 elections were held in a peaceful environment compared to the past.

The peace ensured that economic activities would continue undisturbed by political machinations.

In the run-up to the 2023 elections, there were allayed fears that the Zimbabwean dollar will return on its rapid depreciation path. On the contrary, the Zimbabwean dollar maintained a grip against the United States dollar.

However, after Zanu PF retained the mandate to oversee the running of Zimbabwe’s affairs, those fears emerged again in anticipation that the Government would return to its usual economic mismanagement turf.

Only time will tell, but from the recent macroeconomic development, it is quite evident that policymakers have the toolboxes to make and implement the right policy choices to advance the country’s progress.

The question remains on whether the current trajectory can be sustained for the longer term. The Zimbabwean economy is expected to grow by 5,3 percent in 2023, according to the Ministry of Finance and Economic Development.

The energy supply situation in the country has significantly improved following the successful synchronisation of the Hwange 7 and 8, adding 600 megawatts to the national grid.

The economy was losing hundreds of millions of dollars due to power outages. Towards achieving Vision 2030, the energy demand will continue to grow and, therefore, there is a greater need to continue investing in power supply, particularly renewable energy.

From a positive perspective, it is quite prudent to report that the ruling party and the Government in general, will seek to see through the successful completion of ongoing projects countrywide in order to present an advantage to Mnangagwa’s successor, four years later on.

Without anything tangible to show on the ground in 2028, the ruling party stands no chance to retain power.

A good measure of whether there will be anything to show will be the implementation of the National Development Strategy 1, which has clear objectives and aspirations of the people of Zimbabwe by 2025.

Just like the other “national blueprints” such as the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) (2013-2018), the National Economic Recovery Programme (NERP) (2003), and the predecessor to the NDS1, the Transitional Stabilisation Programme (TSP) (2018-2020); the NDS1 (2021-2025) is more likely to suffer the same fate of suboptimal performance and lack of full implementation.

Indeed, there have been quite formidable strategies and programmes earmarked to transform the Zimbabwean economy, but they have not been fully implemented due to a lack of resources, and poor governance, among other issues.

For any meaningful developmental work going forward, funding will be crucial and without multilateral and international financial institutions’ support, there are bottlenecks on the road ahead.

The African Development Bank, which is leading Zimbabwe’s Arrears Clearance and Debt Strategy will only offer concessionary funding to the Government if the current external debt in excess of US$13 billion is cleared.

Zimbabwe’s Arrears Clearance and Debt Strategy is a plan to clear the country’s external debt arrears and re-engage with development partners and creditors in line with the NDS1.

The strategy was adopted in December 2021 and aims to resolve the country’s long-standing debt overhang, which is weighing heavily on the country’s development agenda.

The Government has been implementing notable economic and governance reforms since 2018 to meet its development objectives.

These include economic growth and stability reforms, governance reforms, land tenure reforms, compensation of former farm owners, and resolution of Bilateral Investment Protection and Promotion Agreements (BIPPAs).

In February 2022, the African Development Bank President, Dr Akinwumi A. Adesina, was appointed as the Champion of Zimbabwe’s Arrears Clearance and Debt Resolution process.

Dr Adesina is supported by the former President of Mozambique, Joaquim A. Chissano, who was appointed as the High-Level Facilitator of the dialogue process between the Government and Zimbabwe’s international creditors.

In December 2022, the Government established a Structured Dialogue Platform (SDP) with all its creditors and Development Partners.

Three Sector Working Groups (SWGs) were established on Economic Reforms; Governance Reforms; Land Tenure Reforms, Compensation of Former Farm Owners and the Resolution of BIPPAs. Since December 2022, SWGs have been working diligently on the reform matrices to underpin the Arrears Clearance and Debt Resolution process.

As the NDS1 places the private sector at the centre stage of the country’s recovery and growth agenda, sound reforms and political will are indeed fundamental towards creating an enabling environment for the private sector to flourish.-ebusinessweekly