ZANU PF was drowning in celebrations last week after vanquishing MDC-T for the keys to rule Zimbabwe, but analysts warned that any populist policies by the victor would bring the economy to a standstill.
BY NDAMU SANDU
The party’s campaign for last week’s harmonised elections was hinged on the empowerment crusade, saying it had capacity to create jobs and was a substitute for foreign direct investment (FDI).
The country has been battling from a liquidity crisis worsened by more imports than exports. The economy virtually has a no-savings culture.
The banking sector is constrained and cannot lend long-term due to the short-term nature of deposits.
The sector cannot seek accommodation from the central bank in the event of liquidity mismatches as the regulator, too, has no capacity.
Added to the setbacks are indigenisation threats which affect lines of credit.
“How the new government handles the indigenisation policy on the banking sector will be closely watched and if it messes up, we will say goodbye to lines of credit,” a banking executive said yesterday.
Analysts say Zanu PF should not celebrate forever as there were attendant issues that have to be resolved as a matter of urgency.
Top on the list was the increased expenditure brought by the new Constitution, which will result in the creation of provincial councils and a number of commissions against stagnant monthly revenue collections averaging US$290 million.
In his mid-term fiscal policy review statement, Finance minister Tendai Biti warned of a tough road ahead unless there was a fundamental increase in revenue collection.
He said that government would struggle to pay salaries.
“I reckon that the new government is going to require a salary buffer of US$1 billion to avoid default on wages given the increase in number of offices that have been created by the new Constitution,” Biti said.
The dollarisation of the economy and the inability of the monetary policy to be used as an instrument of growth means that the country’s growth would be hugely affected by what is happening on the global stage.
The over-reliance on the exports of primary commodities has placed the country at the mercy of international markets.
Infrastructure such as road networks, electricity and water need a revamp.
The manufacturing sector is struggling, with capacity utilisation expected to fall further this year from 44,2% recorded in 2012.
Even with the low capacity utilisation obtaining, the enablers — electricity and water supplies — are failing to meet the demand.
“Industry can’t afford another decline in capacity utilisation and the new government should ensure that long-term funding is available. Populist policies should be discarded and it’s now time to work for Zimbabwe,” an industrialist said.
Analysts say the new government’s relations with the bilateral and multilateral financial institutions were key to unlocking foreign capital.
Zimbabwe is working on an International Monetary Fund (IMF)-supervised economic reform programme, which runs up to December.
The IMF’s Staff Monitored Programme marks Zimbabwe’s steps towards re-engagement with the Bretton Woods institutions.
Biti has in the past accused a faction in Zanu PF of working to derail the IMF supervised programme.
This has raised fears that Zanu PF may attempt to disregard the programme since it was strongly against any advice from multilateral institutions after bad experiences of the past.
“They cannot afford to disregard the IMF programme because the ramifications will be too ghastly to contemplate. IMF is the financial Commissioner of Oaths and if it says something, other institutions follow suit,” a banking executive said.
Zanu PF has in the past complained of the hardships created by the use of multiple currencies and even proposed the return of the local currency.
Analysts however say the return of the Zim dollar is not a top priority for Zanu PF as the party has more pressing issues such as performing better than the inclusive government.