In economic policies, can we trust?

By The Standard | Oct. 19, 2014

Since independence in 1980, Zimbabwe has implemented numerous economic policies.

Nesbert Ruwo

Each policy served a particular purpose in the post-independence economic history of the country.

The latest policy, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, commonly known as the Zim Asset, is the “new economic blueprint” set to revive the fortunes of the country which has been under immense pressure since the dawn of the new millennium.

In this week’s column, I “pull out” the economic policies that Zimbabwe has implemented over the years. The jury is in your hands to judge whether these policies achieved their objectives.

It is important to look at the current policy in the context of the economic history of the country.

Soon after independence, the country underwent a period of post-war reconstruction and the government invested heavily in health, education, rural development and productive sector supported by foreign donor funding and increased government expenditure.

During the 1980s, the country implemented the Growth with Equity (1981), the Three Year Transitional National Development Plan (1982-85), and the First Five Year National Development Plan (1986-90) policies.

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The objectives of the first two policies were to create a “socialist and egalitarian and democratic society” while the later sought to achieve economic transformation and growth. World Bank data show that Zimbabwe’s GDP (at 2005 constant prices) grew by an average of 5,38% per annum between 1980 to 1990 and that public expenditure was high for most of the decade.

Post 1990, Zimbabwe undertook several economic policies.

In 1990, the government embarked on a World Bank-sponsored five year Economic Structural Adjustment Programme (Esap) aimed at liberalising the economy to a more market-driven one. World Bank supported Esap with a US$125 million structural adjustment loan and a US$50 million structural adjustment credit.

In 1991, a Framework for Economic Reform (1991-95) was announced aimed at privatisation of state-owned enterprises. According to World Bank data, the economy achieved an average annual GDP growth of 1,39% between 1991 and 1995.

In 1998, the Zimbabwe government launched, two years behind schedule, the second stage of its economic structural adjustment programme, the Zimbabwe Programme for Economic and Social Transformation (Zimprest).

The Zimprest (1996-2000) was aimed at creating a stable macro-economic environment to support increased savings and investment in order to achieve higher growth and improvement in the standard of living for all Zimbabweans.

During the 1996-2000 period, the average annual GDP growth rate was 2,41%.

The dawn of the new millennium came with a Millennium Economic Recovery Programme (Merp) (August 2001-2002), a programme that was meant to arrest the economic decline.

This was followed by the Ten Point Plan (2002) under the Post-Election Economic Development Strategy and Economic Recovery Programme, and then the National Economic Revival Programme (Nerp) in 2003. A Macroeconomic Policy Framework was implemented between 2005 and 2006.

The year 2007 brought the National Economic Development Priority Programme (NEDPP), while the Zimbabwe Economic Development Strategy (Zeds) was aborted at conception in 2008. Between 2001 and 2008, GDP declined at an average of 7,59% per annum. The African Development Bank calls the period between 2000 and 2008 as “the Lost Decade” of Zimbabwe as the country experienced “a sustained and broad-based decline in economic activities”.

Short Term Emergency Recovery Programme (Sterp) (Feb-Dec 2009), which was initiated on the back of the Global Political Agreement signed on September 15 2008, was focused on “getting Zimbabwe moving again”.

It was meant to reverse negative growth rates, devaluation of the currency, low productive capacity, job losses, food shortages, poverty and massive de-industrialisation. With Sterp came dollarisation — the Zimbabwe dollar was demonetised and South African Rands, United States dollars and other identified convertible currencies became legal tenders.

A successor policy, Sterp 2, which was a two policy document covering the Three Year Macro-Economic Policy (MTP) and the Budget Framework (2010-12) was adopted in August 2009. The MTP dealt with broad developmental and growth policies while the budget framework was a bridge between Sterp 1 and the MTP.

In the 4 years between 2009 and 2012, the annual average GDP growth was an impressive 8,65%, but off a low base of the “Lost Decade” period.

Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset) is a five-year policy currently in implementation. It will run from October 2013 to December 2018 and aims at driving Zimbabwe “towards an empowered society and a growing economy” and is set to achieve “sustainable development and social equity anchored on indigenisation, empowerment and employment creation” underpinned on natural resource exploitation and human capital.

The RBZ, in its July 2014 Monetary Policy Statement, notes that to succeed, Zim Asset requires “robust and prudent fiscal and monetary policy measures” and that the policy requires a total funding requirement of US$27 billion ex-post. Domestic and international financial support will be required.

According to the RBZ, the country needs “to create investor-friendly environment” to attract foreign capital investment. It is clear that Zimbabwe has no dearth of economic policies — over a dozen of economic policies in 34 years were implemented.

Its capability in writing policies (economic and monetary) cannot be faltered.

The debate should be on the objectives, relevance, implementation and effectiveness of any policy that was or will be adopted. How effective was any of these policies that the country has implemented?

In economic policies, can we trust?

Nesbert Ruwo is an investment banker based in South Africa. He can be contacted on [email protected]