Critically assess Zimbabwe’s present economic recovery Essay
The focus of all these policies was to bring about economic development and improved quality of life for Seminarians. Regrettably, none of these economic policy documents together with the accompanying annual budgets have succeeded in producing real positive nagging results especially in the area of poverty reduction. A number of factors account for this hence the rampant poverty that has rocked the country today.
An analysis of the various economic recovery and reform programmer is done summarily done below with more emphasis and time given to the most recent one – NEAR. Economic Structural Adjustment Programmer (ASAP) In October 1 990, the Zanzibar government succumbed to Western donor pressure and grudgingly agreed to implement the five-year Economic Structural Adjustment Programmer (ASAP) as a response to the economic crisis which had been afflicting the country since the asses.
The measures introduced were: Removal of price controls; Removal of wage controls; Reduction of government expenditure; A 40 per cent devaluation of the Zimmermann dollar; Removal of subsidies on basic consumer goods; Liberalizing the foreign currency allocation system; Removal of protection of non-productive import substituting industries and increased profit remittance abroad; and A radical restructuring of the various pratfalls and other public enterprises. Sap’s prime
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Economic liberalizing was expected to accommodate major fiscal reforms, aimed at trimming the budget deficit from 10% of Gross Domestic Product (GAP) to 5%, increasing national output by 5% over the reform period, as well as reduction of inflation from over 17% to 10% by 1995. The major achievement made by ASAP was domestic deregulation, trade liberalizing, foreign currency liberalizing, and foreign direct investment liberalizing (among other areas of deregulation). The major challenge during the period was the issue of huge fiscal deficits that averaged 10 percent of GAP.
Though inflation was an issue, it was still within manageable levels. Zanzibar Program for Social and Economic Transformation (SIMPLEST) Beyond Sap’s phase, the Program for Social and Economic Transformation was implemented from 1998 to 2000, with focus on consolidating the gains of economic liberalizing. SIMPLEST still pressed forward with economic stabilization, aiming to reduce the budget deficit from 10% of GAP to 5% and inflation to single digit levels. The major constraint SIMPLEST encountered was the fact that donors did not provide any funding, nor did budgetary provisions take note of its funding.
The economy as a exult subdued, and savings and investments tumbled from 18% of GAP in 1996 to 9% and 13% respectively in 1999. Millennium Economic Recovery Program ( In the year 2000, the Millennium Economic Recovery Program (MERE) was launched, with a thrust towards restoring macro economic stability and therefore restore a vibrant economic growth and ridding the economy of inflation. Fiscal reforms and monetary policy measures would foster to restore price stability, while the domestic debt portfolio was to be massively restructured and industry sector revived.
The program never took off due to lack of coherence on whether the economy should antique on liberalism or perhaps pursue a compromise, which places less emphasis on markets. At most MERE was marked with major policy reversals with initial and subsequent commitments to adjust the exchange rate for example remaining on ice, and the local unit maintaining a peg of Z$55 to the IIS$, despite widening inflation differentials with trading partner counties. It is also the time when the government reversed market economics, culminating in the institution of price controls in the third quarter of 2001.
The failure to implement MERE marked the turning point on steeper falls in business inference in Assemblies economic history, with business failure rising significantly. The economy took a steeper downward trajectory in the period. Since then economic events have not helped either to build or sustain business confidence. The performance of most sectors was largely influenced by the aforementioned economic terrain; where neither ASAP nor SIMPLEST have been able to tame macro economic instability and MERE went on to accommodate it.
All productive sectors have maintained a negative growth trend since the year 2000, save for estate, finance and insurance. The performance of these sectors hence mirror the persistent decline n national output. Since there is a strong correlation between agriculture and manufacturing, the ASAP era had a strong growth for all sectors, yet the SIMPLEST and MERE depict basically an erratic and downward trend. National Economic Revival Programmer (NEAR This is the most recent of the economic reforms and was launched in February of 2003.
This was a brainchild of consultations with social partners namely Government, Business and Labor under the Tripartite Negotiating Forum (TNT). NEAR was formulated with the principal objectives of: Increasing the output across the productive sectors as a way of reducing shortages ND curbing the black market; Increasing employment generation through sector specific measures and Improving exporter viability and the supply of foreign currency through an Export Support Scheme. Under NEAR, sector specific measures were deregulated which are: agriculture, manufacturing, small and medium enterprises (Seems), mining, tourism and services sectors.
Under agriculture, the following measures are being implemented:- Offering viable producer prices timorously Entering into contract farming to ensure adequate supply of strategic crops for exports, local consumption and seeds; Putting in place a Dairy Development Facility; Providing adequate resources to enable the productive use of the land, since the latter is a basic economic resource which must be exploited efficiently and effectively and Introducing duty free exemptions on imported agricultural equipment not locally available, amongst others.
Under manufacturing, the policy thrust will be to reverse De-industrialization and increase capacity utilization in the manufacturing sector through:- Reviewing the country’s Industrial Development Strategy; Resuscitating the business linkages programmer; Introducing technology linkages programmer between manufacturing industries and institutions of higher learning and research and Availing financial support to distressed companies Under Small and Medium Enterprises (Seems), the Government acknowledges that an integrated policy and strategy for the development of small and medium enterprises (Seems) is critical for generating employment, stimulating growth and contributing to foreign exchange generation and has thus instituted the following :- Developing the enabling and regulatory environment; Investment promotion in Seems; Improving access to markets and finance; Providing technology and infrastructure support and Undertaking entrepreneurship, management and s
In the mining sector, the measures include:- development programmer Allowing the small scale mining sector to benefit from the productive and export sector facilities where they access at 1 5 and 5 percent respectively; Putting in place incentives for projects that encourage value addition of exported minerals and metals in order to increase foreign currency generation and employment opportunities and Implementing a revised and consolidated fiscal regime for the sector. Under Tourism, in order for Zanzibar to regain its reputation as a leading tourist destination, the following will be done:- Launching a public relations campaign; Intensifying marketing activities and broadening tourist source markets to realist diversification; Encouraging investment in tourism infrastructure (such as shopping malls, agro and echo-tourism development zones) and Promoting the cultural industry to realist its income potential through cultural tourism.
Under the services sector, the following will be implemented amongst others:- Enhancing marketing of agricultural commodities by establishing an Agricultural Marketing Authority; and’ Recapitulations of key public transport enterprises in order to improve urban transport. In addition, the Government through the Tripartite Negotiating Forum signed a Prices and Incomes Stabilization Protocol on 30 January 2003 whose fundamental objectives are to:- Enhance viability of companies as well as sustain production; Guarantee the availability of products on the market at affordable prices; and Deal effectively with problems arising from the regime of price controls.
Further, rennet NIST touted t the tolling measures to ensure that savers and borrowers mutually benefit from the following interest rate policy:- Narrow the current high spreads between deposits and lending rates in line with international best practices; Reviewing upwards deposit interest rates on consumption and speculative activities; Reviewing the proliferation of service charges levied on depositors by banks. The link to the 2003 National Budget hinges upon: Development of a Macroeconomic Consistency Framework which ensures consistency between policy implementation and performance of the four sectors of the economy; A supplementary budget to accommodate additional expenditures occasioned by the financial implications of NEAR; and Development of a Medium Term Expenditure Framework to ensure the improvement f the macroeconomic environment, for the period 2003 to 2005.
Assessment of the National Economic Revival Program: The best tool to asses NEAR is the Strengths, Weaknesses, Opportunities and Threats model which is outlined below: NEAR Strengths: Some of the strength of NEAR are as follows: It is about immediate measures to revive the economy, which gives it some urgency and focus; It draws heavily from deliberations of the TNT and was in fact sanctioned by it. This implies a high level of consensus on the policy measures contained therein; It specifically derogates responsibility to specific bodies or parties. It is therefore easy to check who has to what by looking at the implementation matrix. It is part of a comprehensive set of protocols focusing on specific areas; and It had a clear time frame. NEAR Weaknesses NEAR suffers from the following weaknesses: Its implementation is based on the TNT principles of trust and goodwill.
Without these, it founders; Slippages in one area affect the rest; Lack of harmony and consistency of government policy creates unwarranted policy conflicts that undermine its implementation; Deteriorating political conditions and in particular increased plantations of the Zimmermann society undermine its implementation and therefore success; it comes after the budget: in the context of already inadequate resources, it falls on its face. It contains high expansionary measures (for instance on land), which are inflationary (yet in its own analysis it decried the fact that money supply growth reached 150% by December 2002); It lacks measures to deal with hyperinflation.
No sterilization measures are included; It is about everything, and yet it is a short term programmer; there is no propitiation of issues; It is based on representative democracy; constituencies may not be aware of what hey have been bound to or may not be able to implement their obligations; It is impeded by a general lack of political will; and It has no time horizon. NEAR Opportunities The opportunities to it include: What needs to be done is collectively determined and known; Given the right environment, the stakeholders are committed to implementing it; Flexible framework of the TNT based on the win-win principle; and It allows for self and collective responsibility and evaluation. NEAR Threats The key threats to NEAR include: Policy conflicts (stabilization versus expansion); lack of adequate implementation capacity;
Overcrowded agenda and lack of propitiation; Unrealistic expectations; sometimes seen as a quick-fix magic; Lack of resources and continued resort to domestic borrowing; Slippages in implementation; the programmer is already behind schedule; In formalization of the economy; Political expediency may result in policy inconsistencies; Continued political plantations; Stakeholder mistrust and misunderstanding; and Lack of political will. Conclusion: However, a combination of near-total disregard by government for all those components of the programmer which were at variance with intensive state control of al major facets of the economy, or which were in conflict with failed ideologies, and two years of severe drought, saw the first three years of ASAP as an economic non- event.
By 1993 government had little alternative but to implement much of that which it had up until then disregarded, although it did so reluctantly and half- heartedly. Nevertheless, belatedly ASAP began to yield positive results and therefore it was used as the basis for the next programmer, intended to be implemented from 1996 the Zanzibar Programmer of Economic and Social Transformation (SIMPLEST). But government’s lack of enthusiasm was such that although the programmer was to be embarked upon in 1996, it was only released to the population in general and to investors, financiers, commerce and industry in particular in 1998 and never meaningfully introduced.
So in 2000 government announced its Millennium Economic Recovery Programmer (MERE). As with SIMPLEST, that programmer proved to be only plentiful words and glossy papers but devoid of any substantive implementation and it was soon cast away into oblivion. In its stead, government announced a new programmer the National Economic Recovery Programmer (NEAR) in February. However, with virtually the only exception being an “exchange rate adjustment” or “export support exchange rate” (both being euphemisms for “devaluation”), NEAR was as shallow in its application as had been ASAP, SIMPLEST and MERE. The economy has continued to decline to an ever greater extent, with many believing, erroneously, that it is now beyond redemption.
Not only has government shown remarkably consistency in its failure to implement any of its formal economic development or recovery programmer other than with the greatest of superficiality, but it has shown equally great consistency in devising and implementing actions diametrically opposite to those envisaged by the various programmer and plans that it had so proudly placed before Seminarians. In so doing, it has brought the economy to its knees. Inflation has reached an astronomic level of more than 364,5% for the year to June with that month’s inflation at 21 , 1%, an all-time record. Never has there been such a high proportion of the population without employment. Never has there been so many suffering and facing malnutrition, if not severe starvation, at incomes far below the poverty datum line, as is now the case. Never has
Zanzibar been as short of foreign exchange, with consequential devastating shortages of fuel, energy, basic foodstuffs, industrial raw materials, agricultural and mining imports, medications, and much else. Agriculture has been virtually destroyed, the mining industry’s operations heavily reduced, tourism emaciated, and the manufacturing and distributive sectors battling to survive. And never has government incurred deficits of the scale that are now the order of the day. So great are those deficits that government must now present a supplementary budget to parliament as the national budget tabled in November 2002 and the fiscal UT-turn to date have no commonality.
As has become a regularity, the spending of almost all ministries is way in excess of the votes approved by parliament. Compounding the problems created by government’s profligacy has been the differential in governmental revenues received as against those envisaged in the national budget. With a withering economy, it is inevitable that taxation receipts must fall and with limited foreign exchange the extent of imports diminishes with a corresponding reduction in inflows of Customs duties and import taxes. But another significant non-receipt is that in contrast to expectations in the 2001, 2002, and 2003 sectional budgets, government has had very little by way of proceeds from the intended prevarication of state enterprises.
The intention to divest itself of all but the most critically strategic businesses owned by government has been one of the major elements of ASAP, SIMPLEST, MERE and P While government repeatedly tailed to pursue many to the elements to those programmer, nevertheless it did effect some prevarications between 1998 and 2002, and with some considerable success. Effectively and successfully, the Jewel Bank, Dartboard, Rainbow Tourism Group, Cotton Company of Zanzibar, and Zanzibar Reinsurance Corporation were rivalries. Not only did government realist significant amounts from the sale of its investments but the privatized enterprises rapidly demonstrated substantial growth and enhanced efficiency of operations.
The prevarication programmer has clearly ground to an ignominious halt and contrary to detaching itself from commercial and other economic production enterprise; government is increasing its involvement through some of its pratfalls. Enterprises such as the National Oil Company of Zanzibar, Zanzibar Electricity Supply Authority, National Railways of Zanzibar, Cold Storage Company, Air Zanzibar, Zanzibar Broadcasting Corporation, the GM, and many others have become an ever-heavy millstone around the neck of the fichus. Evidently, therefore, the inclusion of prevarication in NEAR is yet another hollow economic plan of government one devoid of substance. Pity, therefore, the poor officials in the Ministry of Finance and Economic Development required to formulate the supplementary budget.
They have to find ways of exacting the funds needed by government but have great difficulty in finding any way of doing so within a derelict economy without further catastrophically afflicting that economy and without extorting yet more from a desperately impoverished population. Under the current programmer (NEAR), the government was supposed to have explored models of land tenure systems visas a visas property rights by March 2003. It was supposed to have reviewed maximum AY farm sizes and rationalized and consolidated land allocation in line with an audit by the Land Task force the same month. Instead, it threw away the report without disclosing its findings to the public and setup another audit team which is still working on its audit.
The government is supposed to have reviewed and topped up input schemes, finance ND extension services and facilitated the setting up of commodity associations by the same month. It should have introduced a Dairy Development Programmer to revive dairy farms by March 2003 and transformed Agrarian into a Land Bank as well as the disbanded Agricultural Marketing Authority. Other tasks that should have been carried out by March included the review of the Industrial Review Strategy to address De-industrialization, low capacity utilization, increased exports and empowerment and, a review of the gold support scheme. International public relations companies should have been hired to counter negative publicity.