Senior Business Reporter
Government’s efforts to turnaround and place the economy on a path to sustainable growth are bearing fruit, amid strong evidence of significant progress achieved against key milestones targeted under the Transitional Stabilisation Programme (TSP) (2018-2020).
Finance and Economic Development Minister Professor Mthuli Ncube said this when he issued an update on progress made since the Government introduced its short-term recovery plan in October 2018.
Notably, while Zimbabwe appeared to have a stable economy during the dollarisation era, this was a mirage and not sustainable, especially without a domestic currency, significant policy shift to realign key fundamentals, attracting foreign investment and reintegrating into the global family of nations.
As such, the TSP targeted political reforms, to align laws to the Constitution, further constitutional amendments, governance and institutional reforms, devolution, compensation of white former commercial farmers, State enterprise reform (five SOE earmarked for immediate reform), national budgetary transparency, competitiveness and ease of doing business reforms among other key areas of focus.
More broadly, reforms cover key areas of the economy and projects in mining, tourism, infrastructure, industry, health, youth and gender, financial sector and savings mobilisation, ICTs and the digital economy.
Key objectives of TPS include macro-fiscal stability, laying the foundation for private sector led growth that is sustainable, shared and equitable, further democratisation of the country, normalising international relations, infrastructure development, public and social service delivery and social protection.
The objectives are informed by sub-themes for the achievement of Government’s Vision 30 by which time Zimbabwe is expected to be an upper middle income country.
The Vision 2030 sub-themes broadly cover areas such as governance, macro-economic stability and financial re-engagement, inclusive economic growth, infrastructure, utilities and social development.
Part of the biggest achievements was the successful introduction of the foreign exchange Dutch Auction system on 23 June 2020, which is designed to reduce exchange rate instability and improve price discovery.
This has seen the exchange rate stabilising, after it moved from $25 to US$1 to around $83 to US$1, where it has remained for the better part of July, August and September.
“Price stability is now visible in line with convergence of parallel and auction rates. (Government also) introduced a second auction system for small scale operators,” Prof Ncube noted.
With exchange rate and price stability, annual inflation is projected to close the year around 50 percent, consistent with reducing the month-on-month inflation from 31.7 percent in June 2020 to less than 5 percent by the last quarter of the current year.
“The premium on the parallel and official exchange rates has significantly narrowed from a peak of 300 percent on 22 June 2020 to current 26.4 percent,” Minister Ncube said.
On macro-fiscal stability, President Mnangagwa’s administration, through Treasury, has plugged leakages, enhanced revenue collection through taxes, contained expenditure to manage inflation and discontinued recourse to central bank borrowing.
Additionally, the Government has cut the public service wage bill from 92 to 50 percent of national budget, rationalised posts, froze hiring except for critical posts, reformed the public finance system and the State procurement system to cut on inefficiency and leakages.
The new administration has also turned perennial budget deficits into surpluses, which reached $1,2 billion by June 2020, and have largely been used for interventions in times of disaster and emergencies, social service delivery, social protection as well as key infrastructure development. In the six months to June, $6,5 billion was sunk into roads, a key enabler.
Reforms around the monetary policy have entailed introduction of local currency, last used in 2009 before dollarisation, strengthening the Reserve Bank of Zimbabwe monetary policy committee and board of the central bank as well as continually reducing reserve money.
Further, Treasury introduced exchange rate linked investment instruments, burst speculation on the stock market and stopped borrowing for speculation through high interest rates, cutting subsidies and introducing interoperability of mobile platforms.
Under devolution, the Government increased transfer of resources to support projects at local authority level. In 2019, $657 million was disbursed and this is expected to increase to $2.9 billion in 2020.
Government is also supporting several regional economic development programmes such as the spatial development in Victoria Falls and agriculture related spatial development in Binga, Kanyemba, Tokwe Mukosi Dam area and Batoka City.
A pariah State for nearly two decades Government is pursuing reengagement starting with changing of diplomatic staff in key embassies while taking an economic diplomacy thrust.
The new administration is also engaging with the Zimbabwean Diaspora for skills, resources and networks and placing emphasis on regular engagement with foreign diplomats while continuously engaging and reengaging with multilateral and bilateral creditors on international debt arrears.
President Mnangagwa’s Government has launched the second phase of ease of doing business reforms, which have culminated in the establishment of a one stop shop investment centre, which is now operational.
This has seen Zimbabwe’s 2020 World Bank ranking improving to 140 from the previous position of 155, meaning it has improved by 15 positions.
According to the 2019 World Bank Doing Business Report Zimbabwe was one of the top 20 in the world and top five in Africa doing business reformers.
Alignment of laws to the Constitution is almost complete and by end March 2020, 144 laws had been amended out of 183 that needed to be aligned to the Constitution. Efforts are underway to work on the balance of 39.
For instance, the new administration has repealed the Public Order and Security Act (POSA) and the Access to Information and Protection of Privacy Act (AIPPA), replacing them with the Maintenance of Peace and Order Act and Freedom of Information Act, respectively.
The Government is concluding the repealing of the Indigenization and Economic Empowerment Act to replace it with an investor friendly law, the Economic Empowerment.