Nor does her assertion that the sanctions, on more than a hundred individuals and on businesses owned by the ruling Zanu-PF and the state, are “a disincentive to overseas banks and investors” and have “limited certain exports and imports”.
Official data tell a very different story. In the three years since the country dollarised at the start of 2009, GDP growth has averaged 8 per cent a year – the fastest yet achieved over such a period since Independence 32 years ago.
Inflation has averaged less than one per cent a year, while exports have increased 40 per cent annually – about ten times the growth rate of world trade. Imports – far from being limited by sanctions as Pillay says – have almost trebled to reach an unsustainable 75 per cent of GDP in 2011. The trade gap trebled from $1bn in 2008 to $3bn last year.
Pillay’s comments on investment and foreign loans are equally wide of the mark. Foreign direct investment rose from $105m in 2009 to $373m last year while portfolio inflows, mostly through the Zimbabwe Stock Exchange, are put at $140m. In the last two years the country has borrowed $1.2bn offshore.
The real reason why Zimbabwe’s offshore borrowing is constrained is the country’s foreign debt arrears of over $7bn (70 per cent of GDP). Targeted sanctions are not part of the equation. To claim that the vulnerable and poorest segments of the country’s 11m people are suffering because of financial and travel sanctions imposed on president Robert Mugabe and his closest supporters is misguided.
Per capita incomes have risen five per cent a year for the last three years – the first such growth since the mid-1990s. Some 45,000 new formal sector jobs were created in 2010 (there are no employment data yet for 2011) after a decade in which over half a million people lost their jobs. Meanwhile, average real wages have more than doubled since 2008.
Living standards and employment collapsed in the “lost decade” to 2008, not because targeted sanctions were imposed in 2002 but because Mugabe’s Zanu-PF government adopted economically disastrous policies, from fast track land reform to reckless central bank credit creation that culminated in the collapse of the currency and the disappearance of the Zimbabwe dollar at the end of 2008.
The subsequent turnaround in the Zimbabwe economy is primarily the result of dollarisation with a little bit of – usually exaggerated – help from the inclusive government headed by Mugabe and prime minister Morgan Tsvangirai since February 2009. Whatever adverse effects the sanctions have had were swamped by the positive impact of exchange rate stabilization which squeezed hyperinflation out of the system in just a few weeks, reviving the financial sector and restoring business confidence, at least in the short term.
But the dollarization bounce is beginning to run of steam. Economists say GDP growth in 2012 is likely to be little more than the estimated 9 per cent achieved last year. Because sanctions have had minimal economic and social impact, their immediate suspension, advocated by Pillay, would not stimulate economic growth. Instead, it would give Mugabe’s Zanu-PF party a boost before elections to be held sometime over the next 18 months – thereby putting at risk the fragile gains achieved during the last three years. – http://blogs.ft.com/Post published in: News