The IMF verdict on the economy has been celebrated by officialdom as an endorsement of the current order by the Bretton Woods institution. State papers last week led with headlines that the “country was on the right track”. But it is too early to celebrate. There is a caveat to the IMF’s conclusions on the health of our economy. The assumption on economic growth is predicated on the fact that “there are no policy reversals or disruptive political developments” in the country.
The IMF said for the economy to continue on the growth path next year, “political stability, fiscal prudence, improved governance, stepped up efforts to address intensifying macroeconomic risks, wage restraint and strengthening in the business climate are essential”.
IMF head of delegation to the Zimbabwe mission, Vitaliy Kramarenko, summed up what needs to be done: “The key challenge going forward is to build the necessary support for policies that would ensure sustainability of the nascent economic recovery and improvements in living conditions for Zimbabweans.”
He is right. Our current modest growth and newfound stability are built on very shaky foundations and the risk of Zimbabwe sliding back to the madness and violence of last year are real as cited in the report which said the outlook for next year was subject to “significant uncertainty and the balance of the risk to the uncertainty is slanted to the downside”.
The IMF, considering the situation on the ground at the moment, is right to conclude that growth next year could be hamstrung by a possible deterioration in the political situation, a potential emergence of liquidity and solvency problems in the banking sector and insufficient progress in maintaining the rule of law and property rights.
The tell-tale signs of this instability have not evaporated since the formation of the inclusive government at the beginning of the year.
In fact lately there is greater evidence of this potential for instability. The failure to implement key facets of the GPA and the subsequent partial withdrawal of the MDC from government, the arrest of lawyers on spurious charges, continued farm invasions and the now-so-boring but damaging attritional war of egos between Finance minister Tendai Biti and central Bank governor Gideon Gono have conspired to sabotage growth potential and recovery.
The failure especially to fully consummate the GPA is a major threat to political stability in this country. We have also noticed an unfortunate trend lately. Instability in the government of national unity has provoked delinquent behaviour in Zanu PF and with it arms of government under the stewardship of the party. The detention and deportation of UN torture expert Manfred Nowak is a case in point.
Civic society leaders including Zimbabwe Election Support Network staff have been arrested on allegations of holding political meetings without informing the police. We ask what happened to assurances made by Home Affairs co-minister Giles Mutsekwa in July regarding public gatherings? The message is clear here: If the MDC pulls out of the GNU, then we will behave badly whatever the consequences, Zanu PF seems to be saying.
As long as there is no quick settlement to the current political morass, we are going to witness more incidents of damaging behaviour by the state in the name of sovereign rights. Already a lot of damage has already been done to the detriment of investor confidence which was beginning to gather pace. We are relapsing into a state business would not want to invest. We seem to be making a valiant effort to reclaim the bad-boy status we had until recently.
The IMF in its report warned of the danger of this relapse. The fund said political uncertainties could result in a “sudden stop of capital inflows, higher than expected domestic credit growth or an adverse terms of trade shock could trigger a disorderly balance-of-payments adjustment with a concomitant negative impact on financial system stability, revenues and growth”.
Our credit risk has continued to deteriorate. Those offering lines of credit are circumspect of the risk inherent here. Any banker will testify to the punitive premium on risk imposed by international financiers. Since the withdrawal by the MDC-T from the GNU the premium has gone up and acts abridging fundamental basic rights raise the risk.
The net effect of this high-country-risk is the unattractive costs of borrowing. Capital is expensive and industry cannot borrow to reopen factories or improve capacity utilisation. Economies are built around credit. It is fundamental to spurring business activity and improving national savings.
Our politics are embarrassingly delinquent at the moment. It is not good for business and is a good setting for social unrest as long as industry and commerce cannot create jobs to absorb thousands of youths who can easily be bought to crush skulls and terrorise political opponents.
There is a lot of hype about the upcoming budget and the government has started to talk about a successor economic programme to Sterp but all this will come to nothing as long as we have politicians behaving badly in our midst.