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Zimbabwe’s positive economic thinking

By The Africa Report
Posted on Friday, 21 October 2011 14:43

It takes robust optimism for a coalition government to launch an economic development plan with a timeline stretching to 2015 when half its ministers are agitating for fresh elections within weeks.

Yet the US$9.2 billion medium-term plan was launched on 7 July, a glorious mid-winter’s day at Harare’s conference centre, with economic planning minister Tapiwa Mashakada explaining to the assembled diplomats, civil servants and business people how the government was going to finance the plan with a mix of loans, tax revenues and foreign investment.

The 24-page plan – sporting a preface from President Robert Mugabe and a foreword from Prime Minister Morgan Tsvangirai – is itself a model of optimism with its targets of 7 per cent annual GDP growth, a 6 per cent increase in new jobs each year and inflation in single figures.

All was designed to convey the impression of consensus on economic matters between Mugabe’s ZANU-PF ministers and their MDC counterparts.

Such harmony doesn’t exist but several ZANU-PF ministers have a grudging respect for MDC finance minister Tendai Biti, who has reversed the economic freefall.

Within six months of taking office, he cut inflation of some 500 billion per cent a year to 3-4 per cent a year after suspending use of the Zimbabwe dollar in favour of the South African rand and US dollar.

Biti forecasts the economy will grow at around 9 per cent this year, but has warned that the government needs another US $500 million to finance the planned budget of US $2.7 billion, which includes substantial pay hikes for the country’s 200,000 civil servants.

A team from the IMF visiting Zimbabwe in March reinforced concerns about state revenue shortfalls and a build-up of payment arrears, although the economy is benefiting from historically high commodity prices and subsidised loans.

The IMF economists called for “expenditure measures” – aka spending cuts – although accepted the need for the government to concentrate on social welfare and infrastructure investment.

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