Critically Assess Zimbabwe’s Present (Post Z$) Economic Recovery Programmes. in Your Opinion, What Are the Chances of Their Success?

Topics: Economics, Economic growth, Macroeconomics Pages: 12 (4098 words) Published: January 31, 2013
Introduction
The beginning of 2009 marked the end of over a decade of economic decline in Zimbabwe. The economic indicators decline cut across all key sectors, despite Zimbabwe’s rich resource endowment. Inflation, initially at 100 percent annually between 2001 and 2006, increased to over 1500 percent (McIndoe, 2009). According to IMF estimates, real GDP growth recorded a cumulative contraction of 48% (nearly 5% per year) between 2000 and 2009. Agriculture value added contracted by 86% during the period 2002-2008. Gross national income per capita in 2008 was estimated to be US$360 (compared to sub-Saharan Africa average of US$1,428), making it one of the poorest countries in the world (African Development Bank, 2010). The poverty rate which was already on an increase since 1995 (42 percent) was recorded at 63 percent in 2003 and was estimated to be over 70 percent in 2010 (African Development Bank Group, 2011). According to the economic policy reform proposals announced by the coalition government formed in February 2009, other symptoms of the economic crises as negative GDP growth rates, low productivity capacity, loss of jobs in the formal sector, food shortages, massive deindustrialization and general despondency (STERP, 2009). This paper uses ‘developmental state theory’ as a basis of assessing economic reform policies proposed and currently being implemented by the Zimbabwe’s coalition government after the demise of the Zimbabwe dollar (Z$) in 2009. The paper considers STERP in March 2009, Medium Term Plan (MTP) in July 2010, and the Three Year Macro-economic Policy and Budget Framework 2010-2012 (STERP II) in the context of this economic theory with a view to assessing the extent to which they bring Zimbabwe closer to the key elements of a develop-mental state. This is taken from the premise on which these policies are anchored. For example, the sixth point in STERP says: “STERP is an emergency short term stabilization program, whose key goals are to stabilize the macro and micro-economy, recover the levels of savings, investment and growth, and lay the basis of a more transformative mid-term to long-term economic program that will turn Zimbabwe into a progressive developmental State,” STERP, 2009: point no. 6)

The paper begins with a summary of the key elements of the economic reform proposals. It then looks at the key elements of a developmental state after which it assesses the extent to which Zimbabwe’s key reform proposals would enable it to meet the minimal requirements of a develop-mental state. The paper concludes by offering an assessment of the chances of success for the economic reform measures.

Key elements of Zimbabwe’s economic reform measures
All reform programs are anchored on economic stabilization, increasing productivity and turning Zimbabwe into a developmental state. In the key policy pronouncements announced in STERP (February 2009) and the Medium Term Plan, Government of Zimbabwe (GoZ) had two principal objectives. First, it set out to use domestic savings and foreign finance to carry out public investment projects and to mobilize and channel scarce resources into areas that can be expected to make the greatest contribution towards the realization of long term economic objectives. These include measures “to stabilize the macro and micro-economy, recover the levels of savings, investment and growth, and lay the basis for transformation from mid-term to long-term economic programs that will result in economic growth and reduction of poverty levels. In so doing, the reform programs, as espoused in article 3 of the September 2008 Global Political Agreement (GPA) seek to address the key issues of economic stabilization and national healing, whilst at the same time laying the foundation of a more comprehensive and developmental economic framework. The second is to ensure that economic policy (e.g. taxation, industrial licensing, the setting of tariffs and the manipulation of wages, interest...

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