Lewis Machipisa in Harare
Zimbabwe’s four-year-old economic structural adjustment programme (Esap) has failed to meet its key targets, despite strides to implement the austere measures, says a report by a leading Zimbabwean bank.
According to the strategic planning division of Standard Chartered Bank, the government has not been able to check its extravagant spending, money supply growth, keep a grip on prices and the exchange rate or tackle a huge public sector deficit, the main macro- economic indicators.
Instead, the programme has resulted in runway inflation, plunging incomes — which have hit a 20-year low since the programme started — high interest rates and currency devaluation.
Particularly in terms of employment, the government’s application of its economic reforms is still to make headway, says the bank.
While this is partly attributed to the aftermath of the 1992 drought and a sluggish world economy during the 1990-93 period, the bank notes that the domestic policy response has not been up to the task of coping with adverse external shocks.
After a decade of socialist policies, Zimbabwe finally succumbed to International Monetary Fund and World Bank pressure to implement economic reforms in 1991.
Introduced amid promises of employment creation and cuts in government spending and to alleviate poverty in general, the SAP is now referred to here as ‘Eternal Suffering of African People’.
The Standard Chartered Bank economists note that the two main weaknesses of the first phase of Esap were its failure to establish macro-economic stability and the slow pace of parastatal and public sector reform.
Parastatal losses have exceeded $5-billion since 1986. This accounts for more than three percent of the country’s gross domestic product (GDP).
“Against this background, the country’s deteriorating domestic debt profile is a matter for great concern given the impact that this has on public spending and on crowding out of private sector investment,” says the report.
Contrary to Esap’s aims to reduce central government debt, it has trebled in the past five years, from $9- billion to $28-billion in 1994.
The structural adjustment programme should have cut by 1995 the budget deficit to five percent of GDP from the 7,9 percent. But economists say heavy subsidies to ease parastatal losses means the deficit will actually rise to 10 percent.
“As phase one of Esap nears its end, a new programme must be designed to complete the unfinished agenda of the 1990-95 period, with top priority for public sector reform, including privatisation,” suggests Standard
“The centrepiece for ongoing reform remains public sector restructuring, the budget, parastatal and the civil service,” says the report.
While seemingly admitting the reforms have met little success in Africa, in defence of the programme the World Bank says there is considerable concern that the reforms undertaken to date have been less than full- bore. – IPS