Zimbabwe

Economic revival plan to avert "national instability'' in Zimbabwe

Source
Posted
Originally published
By Jan Raath, dpa

Harare (dpa) - President Robert Mugabe's government Wednesday announced a new plan meant to rescue the country's disintegrating economy.

The 49-page document makes the government's first acknowledgment of the severity of the country's economic dislocation, marked by the state's "failure'' to pay for imports of food, fuel and power in the wake of the collapse of export earnings.

"If not urgently addressed, foreign exchange unavailability will lead to national instability and pose a threat to national security,'' it said.

The National Economic Revival Programme, details of which were published in the state press, lists a series of measures - among them the duty free import of compact discs and videos - that it says will cut forecast economic decline this year by 2 per cent to 8.3 per cent.

However, economists dismissed the plan as "pie in the sky'' and said it failed to deal the basic reasons behind the country's spectacular economic decline - a faulty economic policy, the breakdown of the rule of law and the government's destruction of the commercial farming sector, the cornerstone of the economy.

Introduced by Finance Minister Herbert Murerwa, the NERP says "sanctions'' imposed on Zimbabwe by the international community are the main cause of economic contraction, which has seen gross domestic product dive 20 per cent in the last three years.

Economists pointed out, however, that the only international "sanctions'' imposed were against Mugabe and his friends involved in human rights abuses.

"It (the plan) doesn't touch the fundamentals, that agricultural production is shrinking and will shrink further, that exports are decreasing, and will decrease further,'' said Tony Hawkins, head of the University of Zimbabwe's business school.

"If you are looking for anything concrete, the only point is that you are allowed to import 200 litres of fuel. The rest of it is continuing to spread disinformation, distortions and deceit.''

Devaluation of the Zimbabwe dollar by 93 per cent to 1 US dollar ton 800 Zimbabwe dollars announced two weeks ago was "one positive step, but it's probably too little, too late,'' he said.

Confusion still fogs the complex mechanism of exchange introduced. Part of it allows the state to trade in foreign currency at the old rate - fixed since August, 2001 - of 1 to 55.

"It doesn't mention the state's exchange rate,'' Hawkins said. "No-one will sell forex at 55-1, so the Reserve (central) Bank will have to sell it to the government at that rate. That will give the bank a massive deficit. It doesn't make any sense. It's clearly fantasy.

"They won't call it devaluation,'' he added, referring to the government's persistent reference to it as "export support mechanism.''

Mugabe last year sacked former his finance minister, Simba Makoni, for recommending devaluation.

The plan promises that inflation - currently running at 208 per cent annually - would be countered by raising interest rates, but gave no details.

The government abandoned its International Monetary Fund-prescribed policy of positive rates three years ago and the prime lending rate was cut to about 35 per cent.

Economists pointed out that last week the finance ministry issued a treasury bill, but refused to accept bids from the financial market because the interest rates offered were too high.

"The fact is, they are not allowing interest rates to go up,'' said Hawkins. The document says that to "support its initiatives to fight hunger,'' the government will raise the quantities of food allowed to be brought into the country without an import permit.

However, the concession applies only to "individuals,'' and makes no significant difference to the state's ban on independent imports of basic food commodities by private traders and charity organisations.

Last week James Morris, director of the United Nations' World Food Programme, said that Mugabe's refusal to lift the state monopoly on food imports was helping to "turn a drought that might have been managed, into a humanitarian nightmare.''

About 7 million Zimabweans are facing the worst famine in the country's history after Mugabe in 2000 launched his "revolutionary land reform programme'' for the illegal and frequently violent seizure of white-owned farms. dpa jr ms

AP-NY-03-05-03 0856EST

Deutsche Presse Agentur
Copyright (c) dpa Deutsche Presse-Agentur GmbH