/ 4 March 2008

Foreign cash crucial to reviving Zim economy

Reviving Zimbabwe’s moribund economy would require inflation-battered citizens to swallow the bitter pill of reduced state spending and higher interest rates to attract foreign cash, analysts say.

The ousting of veteran President Robert Mugabe is essential to pave the way for reforms to put the country back on track, they believe, and drastic steps are required to re-instil investor confidence.

“They would have to completely reverse the policies of the current government, drastically cut on expenditure and push up interest rates,” said Anthony Hawkins, an economics professor at the University of Zimbabwe.

“It’s impossible to see a solution without some kind of foreign assistance, so whoever wins will have to go on their knees to ask for aid.”

Mugabe is to seek a sixth term in office in joint presidential and parliamentary polls next month at a time the country’s official inflation rate exceeds a mind-boggling 100 000%.

Zimbabwean unemployment stands at about 80%, even basic foodstuffs are scarce, and the general infrastructure is rapidly crumbling. Life expectancy has plummeted to 37 years for men and 34 for women.

Mugabe is widely blamed for the state of affairs over his controversial land-reform policies — seizing white-owned farms for redistribution to landless black Zimbabweans and all but killing commercial agriculture and scaring off foreign investors.

But the octogenarian leader blames his country’s woes on targeted sanctions imposed on himself and members of his inner circle by the European Union and United States following 2002 elections the opposition and Western observers said were flawed.

Mugabe this month goes up against his former finance minister, Simba Makoni, recently expelled from the ruling Zanu-PF, and Morgan Tsvangirai, head of the main opposition Movement for Democratic Change (MDC).

Analysts said any government elected on March 29 would have its work cut out to attract trade partners.

“There is need for an immediate post-election programme that will have to remove price controls [and] subsidies, and interest rates have to be removed upwards,” said Harare-based economist Witness Chinyama.

“There is also need to come up with policies that will attract foreign direct investment in this country.”

While Makoni has declined to elaborate on his economic vision, the MDC said it planned to reduce money supply, liberalise foreign-exchange markets and restore relations with former trading partners to spur economic recovery.

It would also provide loans to help failed companies back on their feet, halve the number of Cabinet ministers to save money, and woo back professionals who have left the country.

“The MDC does not think that these goals can be achieved easily or quickly and recognises that any stabilisation and recovery programme will inevitably involve both sacrifice and hardships,” party spokesperson Nelson Chamisa said.

“It [MDC] will not only inherit a collapsed economy, failing infrastructure and a massive humanitarian crisis, but also a civil service that is highly politicised and decimated by the loss of both skills and experience.”

Tsvangirai has said the country would need $10-billion to revive the economy.

Launching his party’s election manifesto on Friday, Mugabe pledged to revive agricultural production by providing farming equipment to beneficiaries of his land-reform programme.

He also undertook to plug leakages of precious minerals.

“The mining sector has remained a place that’s closed to us,” he said.

“Unless we are there as owners or shareholders, we will continue to be cheated.”

Zimbabwe central bank governor Gideon Gono said last month he was drafting a new economic blueprint for “price stability, inflation control, investment promotion, as well as revamping the general productivity levels of the country”.

Analysts say the country’s economic future is closely tied to the as-yet-unpredictable outcome of the elections.

“The state of the economy is attached to Bob [Mugabe]. If he goes, the economy will improve. But if he stays, things would continue as they are,” said Godfrey Kanyenze, chief economist of the Zimbabwe Congress of Trade Unions.

Hawkins predicted that not much would change under Makoni, who was likely to continue pursuing Zanu-PF policies.

“Tsvangirai would be able to get foreign aid and assistance, but the question is, will he win?” — AFP