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Economy Biggest Challenge At Talks

PRESIDENT Robert Mugabe and leaders of the two MDC formations, Morgan Tsvangirai and Arthur Mutambara, on Monday signed a Memorandum of Understanding (MoU) setting the agenda for full-scale talks to resolve the country’s economic and political problems.

 

The stiffest challenge for any government that emerges from the talks is achieving the main objective of “restorating of economic stability and growth” in an economy which has shrunk by 60% within a decade.

The MoU states that the talks should be completed within two weeks from the date of signing. The talks are largely expected to come up with a roadmap that would address the economic problems that the country has been facing since 1998.

The MDC will come in to a government which is virtually broke and heavily indebted with a foreign debt of US$4 billion as at March 31 this year, and a domestic debt nearing $20 quadrillion.

The domestic debt figure means every Zimbabwean is personally indebted to the tune of about $142,8 billion.

The manufacturing sector is said to be operating below 30% and all major sectors of the economy are depressed. The Zimbabwean dollar was trading above $1,3 trillion to the United State dollar on Wednesday, but the maximum withdrawal limit from banks of $100 bilion is not enough to buy half a loaf of bread, if available.

Economist Tony Hawkins said there was need for the new government to restore the credibility and discipline of the central bank and financial sector as a whole.

“It is going to take some time for hyperinflation to come down. It is also going to be difficult to prioritise what to tackle first. In the short-term it is important for the new government to effect crisis management and get some foreign currency. But money alone is not going to help,” he said.

There is also the problem of price controls and distortions, and the relevance of organisations like the National Incomes and Pricing Commission (NIPC).

The country’s Reserve Bank is said to be technically insolvent and has incurred huge losses in the region of US$2,5 billion through quasi-fiscal operations. In addition, more money is owed in United State dollar terms to exporters, non-governmental organisations and individual foreign currency holders.

Economic commenter, John Robertson, said the first challenge the new government would face is to halt the worsening slide of the economy.

Inflation is officially said to be 2,2 million percent, but independent economic analysts say the figure was above 10 million percent. Robertson said money alone would not be enough to resuscitate Zimbabwe’s economy.

“For the international community to give us financial support we have to prove that we are worthy of that support,” Robertson said.

The revenue authority has reportedly been prejudiced of almost 60% of potential earnings which have been generated by the informal sector, which is not a recognised source of funds.

The three parties which signed the MoU expressed commitment to dialogue, saying it was the only way forward as President Mugabe and Tsvangirai met for the first time in a decade.

President Thabo Mbeki of South Africa who is the Sadc-appointed and African Union-endorsed mediator was present during the signing ceremony.

Mugabe and Tsvangirai later had lunch together while President Mbeki and Mutambara had theirs separately, and held discussions for close to an hour.

Many hope the two were talking about a serious economic rescue package instead of blaming each other for the political madness that the country has suffered since February 2000.

President Mugabe said: “We sit here in order for us to chart a new way, a new way of political and economic interaction and this out of the decision that we made, we of Southern Africa, some time ago, that we assist each other and in this particular case, we assist Zimbabwe to overcome the political and economic situation which requires support.

“Our having signed this MoU is a serious matter on my part and my party Zanu PF; we take it seriously. The signatures we have appended there (on the MoU), I hope reflect the sincerity of all of us.”

But is Mugabe really aware of the gravity with which the economy has declined since 1998? Thousands of companies have shut down, scaled down operations or relocated to neighbouring countries as the economic environment becomes ever more untenable.

The new government will inherit corrupt government structures and institutions, a situation that might be difficult to undo.

The MDC claims to have a comprehensive plan to deal with problems but analysts said it will be an uphill task to reverse the damage that has been largely caused by the Zanu PF government.

In their political manifesto the opposition has said it will restructure government companies and institutions.

Zanu PF officials who spoke to businessdigest said the MDC would not achieve anything as they have a reputation of “talking too much but doing nothing”.

As such, the parties to the talks could find it hard to come up with a feasible “rescue economic package”.

Said Tsvangirai: “I sincerely acknowledge that if we put our heads together we can find a solution, not finding a solution is not an
option.

“As we sign the MoU, we all commit ourselves to the first tentative step to solutions. I have been reluctant (to endorse the process), but I want to share a heavy commitment that the process of negotiation is successful. We want a better Zimbabwe economically and politically.”

Mutambara described the MoU as a document of great significance that allowed for dialogue, whose outcome should result in a political settlement and later a new constitution.

“The signing of the MoU is very important, it allows us to begin negotiations. This political settlement we seek to achieve in two weeks is not the answer . . . we need national healing. Beyond the political settlement, we want gatherings like these where leaders speak to Zimbabweans,” he said.

By Paul Nyakazeya

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