Critically assess Zimbabwe's present economic recovery and reform programmes. In your opinion, what are their chances of success?

Topics: Zimbabwe, Economic development, Economy Pages: 15 (3268 words) Published: September 10, 2004
Introduction:

Zimbabwe is facing a huge economic crisis that is worsening living standards by the day and a decline in industrial growth. Unemployment is now one of the highest in the world, running at 50% against an annual population growth of 3%, mainly because of inadequate sustainable job creation activities in the market.

The rampant unemployment has given rise to the worsening abject poverty, rising crime levels, falling quality of life and standards of living, as well as general delinquency. Close to 65% of the population is considered poor according to the latest poverty assessment. The country is facing near bankruptcy. The problem is Government's huge borrowings where much of the money is used for recurrent expenditures to meet the day to day running of Ministries. Very little is for capital investments.

Since the attainment of independence in 1980, Zimbabwe has produced a number of Annual Budgets that were supposedly implemented together with the national economic plans such as the following: Zimbabwe Conference on Reconstruction and Development (ZIMCORD), On the Road to Socialism, Transitional National Development Plan (TNDP) that came in volumes I and II; Economic Structural Adjustment Programme (ESAP) 1991-1995, Zimbabwe Programme on Economic and Social Transformation (ZIMPREST) 1998-2000, Millennium Economic Recovery Programme (MERP) 2000-2002, Ten Point Plan and more recently the National Economic Revival Programme (NERP) February 2003. The focus of all these policies was to bring about economic development and improved quality of life for Zimbabweans. Regrettably, none of these economic policy documents together with the accompanying annual budgets have succeeded in producing real positive tangible results especially in the area of poverty reduction. A number of factors account for this hence the rampant poverty that has rocked the country today.

An analysis of the various economic recovery and reform programmes is done summarily done below with more emphasis and time given to the most recent one - NERP.

Economic Structural Adjustment Programme (ESAP)

In October 1990, the Zimbabwe government succumbed to Western donor pressure and grudgingly agreed to implement the five-year Economic Structural Adjustment Programme (ESAP) as a response to the economic crisis which had been afflicting the country since the 1980s. The measures introduced were:

Removal of price controls;

Removal of wage controls;

Reduction of government expenditure;

A 40 per cent devaluation of the Zimbabwean dollar;

Removal of subsidies on basic consumer goods;

Liberalising the foreign currency allocation system;

Removal of protection of non-productive import substituting industries and increased profit remittance abroad; and

A radical restructuring of the various parastatals and other public enterprises.

ESAP's prime mandate was to shift the style of economic management from a setup where state intervention was perverse towards a framework where market forces had more influence. Economic liberalization was expected to accommodate major fiscal reforms, aimed at trimming the budget deficit from 10% of Gross Domestic Product (GDP) to 5%, increasing national output by 5% over the reform period, as well as reduction of inflation from over 17% to 10% by 1995. The major achievement made by ESAP was domestic deregulation, trade liberalization, foreign currency liberalization, and foreign direct investment liberalization (among other areas of deregulation). The major challenge during the period was the issue of huge fiscal deficits that averaged 10 percent of GDP. Though inflation was an issue, it was still within manageable levels.

Zimbabwe Program for Social and Economic Transformation (ZIMPREST)

Beyond ESAP's phase, the Program for Social and Economic Transformation was implemented from 1998 to 2000, with focus on consolidating the gains of economic liberalization. ZIMPREST still pressed...
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