The Sunday Mail
Tawanda Musarurwa
Zimbabwe’s economy has shown an ability to reconstruct and recover across several different exogenous shocks.
As it stands the country has recovered from varying shocks including inflationary pressures that emerged with the re-introduction of the Zimbabwe dollar, Cyclone Idai and most recent the Covid-19 pandemic, which put some global economic powerhouses on their knees.
This comes despite decades-long claims that Zimbabwe is on the brink of an economic crisis. All things being equal, the effect of the above shocks on any economy can be persistent and often go beyond initial projections. But the fact that the local economy is already on a growth path, even in the midst of a health pandemic points to economic resilience.
The impact of the pandemic cannot be underestimated. Earlier this month, the World Bank’s Zimbabwe Economic Update report themed: ‘Overcoming Economic Challenges, Natural Disasters, and the Pandemic: Social and Economic Impacts’, cited surveys conducted in 2020 “which show that nearly 500 000 Zimbabwean households have at least one member who lost her or his job, causing many households to fall into poverty, and worsening the plight of the existing poor. Food insecurity was also exacerbated by inadequate reach/coverage of relevant social protection programmes — less than a quarter of the increased number of extreme poor households received food aid in June 2020, and this share dropped to 3 percent of rural households in September 2020.”
Added the World Bank report: “The pandemic also put pressure on strained public resources, the report notes, exacerbating implementation challenges, severely affecting service delivery in health, education and social protection.” So, it’s an impressive feat that Zimbabwe’s economy is already on the rebound.
But what is economic resilience?
According to the World Bank, “macroeconomic resilience has two components: instantaneous resilience, which is the ability to limit the magnitude of immediate production losses for a given amount of asset losses, and dynamic resilience, which is the ability to reconstruct and recover.”
Critically, a country’s macroeconomic policies are key to determining the extent to which an economy becomes or is resilient to exogenous shocks.
In the 2021 National Budget, Finance and Economic Development Minister Professor Mthuli Ncube indicated that the Government is targeting Gross Domestic Product (GDP) growth of 7,4 percent this year. This growth estimate was based on indicated strategies of boosting production, getting infrastructure fixed and expanded, supporting the vulnerable and increasing the spending power of ordinary people.
Additionally, Professor Ncube said the 2021 financial plan would be underpinned by preservation of fiscal stability and other economic gains of the Second Republic. In this respect, Treasury’s ambitious spending programme would be expected to produce a tiny deficit of 1,3 percent of Gross Domestic Product, well below the ultra-prudent 2 percent laid down as the Zimbabwean maximum and well below the 3 percent set by Sadc, which wants all members to be in economic harmony.
But as per trend, the Government estimates are usually taken with a pinch of salt and are considered “overly optimistic”.
So it came as vindication when this week, Bretton Woods institution, the International Monetary Fund (IMF) doubled its growth projections for the Zimbabwean economy to 6 percent, almost in line with Professor Ncube’s November 2020 projection. The IMF’s revised data on Zimbabwe came after the Bretton Woods institution’s conclusion of a virtual staff visit with the Zimbabwe authorities during June 1–15, 2021 to discuss recent economic developments and the economic outlook. The engagement was led by Dhaneshwar Ghura.
“Zimbabwe has shown resilience in the face of the Covid-19 pandemic and other exogenous shocks,” reads part of Mr Ghura’s statement.
“The IMF mission notes the authorities’ efforts to stabilise the local currency and lower inflation. In this regard, contained budget deficits and reserve money growth, as well as the introduction of a foreign exchange auction system, are policy measures in the right direction.
“Further efforts are needed to solidify the stabilisation trends and accelerate reforms.
“The near-term macroeconomic imperative is to improve the coordination among fiscal, foreign exchange and monetary policies, while addressing Covid-19 related economic and humanitarian challenges.
“In line with the last Article IV consultation, the mission highlighted that structural reforms aimed at improving the business climate and reducing governance vulnerabilities are essential for ensuring sustained and inclusive growth. To this end, the authorities’ strategy and policies as embodied in their National Development Strategy need to be fully operationalised and implemented.
Durable macroeconomic stability and structural reforms would bode well for the recovery and Zimbabwe’s development objectives.”
The positive outlook around the local economy comes in the context of a two-year slow-down and Covid-19 induced economic slow-down that saw the economy sliding by -4,1 percent in 2020.
