Zimbabwe Sticks to Reforms Despite Short-term Economic Pain

HARARE, Zimbabwe, Nov. 7, 2019 /PRNewswire/ -- Zimbabwe is sticking to its economic reforms despite the headwinds caused by natural disasters and sanctions. George Guvamatanga, Secretary for Finance and Economic Development, pointed out that the government's tight fiscal austerity has already resulted in balanced books and a degree of fiscal discipline unseen in Zimbabwe for decades.

"We wanted to achieve fiscal consolidation – Zimbabwe was earlier running deficits of double figures – and to control our trade deficit. We had to make sure that we lived within our means, and we have managed to achieve that," Guvamatanga said in an interview with Zimbabwean newspaper publisher Trevor Ncube.

President Emmerson Mnangagwa, who took over in 2017, has made implementing structural reforms a priority, despite inheriting a struggling economy marked by hyperinflation, cash shortages and endemic corruption under former president Robert Mugabe.

Zimbabwe is now meeting the fiscal and monetary targets agreed with the International Monetary Fund. It expects to reduce the budget deficit from 12% of GDP to 5% in 2019, and the trade deficit which was earlier $1.8 billion has been reduced to $300-400 million.

"We have met most of our agreed targets with IMF – except on inflation and money supply, which need to be recalibrated. We want to continue with the plan as agreed. We are confident we are on course," Guvamatanga said.

The government is aware of the short-term impact on ordinary Zimbabweans as it slashes subsidies on fuel and energy.

"We are aware that these reforms are very difficult for our people, but that does not necessarily mean this is the wrong thing to do. To alleviate the short-term challenges for our people, we have also come up with various social protection nets to protect the more vulnerable members of society," Guvamatanga pointed out.

Zimbabwe currently runs a cash transfer programme to its most vulnerable citizens, totalling $543 million annually.

However, the sanctions imposed on Zimbabwe by the U.S. and the EU under Mugabe, continue to stifle the Zimbabwean economy, limiting the country's access to foreign lenders.

Guvamatanga said sanctions affect all Zimbabweans: "We are a small economy. Zimbabwe has lost 80% of its correspondent banking capacity due to sanctions. Receiving and sending money overseas has become difficult. For Zimbabwe it takes days to complete transactions that should normally take hours."

Despite these setbacks, the government continues to open up the country's economic, political and media spaces. It is currently modernising 30 Mugabe-era laws to meet Western standards.

In July, the World Bank upgraded Zimbabwe from a low income to a lower middle income country. It has also listed Zimbabwe among the top-20 improvers in its Ease of Doing Business index.