The Economist Intelligence Unit (EIU) observed last week that Zimbabwe
does not lack medium-term economic policy documents what was in
short supply however are detailed and credible projections as shown by
last months release of two rival documents by two economic
Finance Minister Tendai Biti published a medium-term policy framework,
some 11 months after the original Short-Term Economic Recovery
Programme (STERP) was formulated.
STERP II, which covers the period between 2010 and12, is a much longer
and more detailed document but, according to EIU, the blueprint has
disappointed many businesspeople and donors partly because of its
generally non-technical approach.
The EIU said further discrediting the governments turnaround
programme was the fact that the Ministry of Economic Planning had
earlier in December published a rival document, the Medium-Term
Economic Programme (MTEP) containing different figures and
STERP II says it contains the macroeconomic policy instruments that
will “anchor the rolling budget for the years 2010-12” while the MTEP
will deal with “broad developmental and growth-oriented policies.
The STERP estimates are also striking in a number of respects.
They are far more modest and substantially more realistic than the
Economic Planning ministrys draft economic plan, which assumes GDP
(Gross Domestic Product) growth of 12.5 percent in 2010 and averaging
15 percent annually over the period to 2015, said EIU.
The GDP growth rates and implied investment growth rates are however
incompatible with sectoral figures.
For instance, it is difficult to see how mining output can grow by 40
percent in a year in which electricity production is predicted to rise
by a mere three percent.
More broadly, STERP II seeks to put a price tag on the critical
financial investment needed to restore the economy to 1997 levels,
emerging with a grand total of US$45 billion.
Of this amount, some US$20 to US$30 billion would be needed over the
three years to 2012.
Bitis blueprint assumes that between US$4 billion and US$6 billion
would be raised through the domestic financial sector while government
revenues from the national budget could contribute a further US$5 to
Public-private partnerships are expected to raise between US$1 and
US$2 billion while the government would look abroad for international
support for another US$7.5 to US$10 billion.
STERP II concedes that international support would depend on the
authorities devising a strategy to deal with the country’s US$3.8
billion of external debt arrears.
The Harare administration therefore hopes to raise US$25 billion to
finance its ambitious investment programme over the next three years.
On any count, however, this looks very ambitious for a country with a
GDP of less than US$5 billion. The implication is that investment must
average 140 percent of GDP over the three-year period, the think-tank
Militating against such a high investment rate are the fact that
domestic savings are currently negligible at present and the
balance-of-payments deficit averages more than one-quarter of GDP.
There is scepticism, therefore, about the projections contained in the
programme, not least because much will depend on a sustained
improvement in the political environment–of which there is little
sign at present.Post published in: News