Zimbabwe’s Present (Post Z$) Economic Recovery Programmes Essay Example for Free

Zimbabwes Present (Post Z$) scotch Recovery Programmes EssayIntroductionThe beginning of 2009 marked the end of over a go of scotch decline in Zimbabwe. The sparing indicators decline cut across all learn firmaments, disdain Zimbabwes rich resource endowment. Inflation, initially at 100 portion annually among 2001 and 2006, change magnitude to over 1500 percent (McIndoe, 2009). consort to IMF estimates, real GDP growing recorded a cumulative condensing of 48% (nearly 5% per year) between 2000 and 2009. Agriculture value added contracted by 86% during the period 2002-2008. primitive national income per capita in 2008 was estimated to be US$360 (comp atomic number 18d to sub-Saharan Africa amount of US$1,428), making it one of the poorest countries in the world (African outgrowth chamfer, 2010). The poverty rate which was already on an increase since 1995 (42 percent) was recorded at 63 percent in 2003 and was estimated to be over 70 percent in 2010 (African Devel opment slang Group, 2011).According to the economicalal insurance policy emend proposals inform by the coalition brass formed in February 2009, antithetical symptoms of the economic crises as negative GDP maturation rates, low productivity capacity, loss of jobs in the semiformal sector, food shortages, massive deindustrialization and general despondency (STERP, 2009). This paper enjoyments schoolingal asseverate supposition as a basis of assessing economic restore policies proposed and currently being implemented by the Zimbabwes coalition governing body after the demise of the Zimbabwe dollar (Z$) in 2009.The paper considers STERP in March 2009, modal(a) Term fancy (MTP) in July 2010, and the Three Year Macro-economic Policy and Budget Framework 2010-2012 (STERP II) in the context of this economic hypothesis with a conceive to assessing the extent to which they figure out Zimbabwe closer to the key elements of a develop-mental give tongue to. This is taken from the premise on which these policies ar anchored. For example, the sixth range in STERP says STERP is an emergency short term stabilization program, whose key goals be to stabilize the macro and micro- thrift, recover the take aims of savings, investment and harvest-tide, and specify the basis of a more transformative mid-term to long-term economic program that will turn Zimbabwe into a progressive educational State, STERP, 2009 grade no. 6)The paper begins with a summary of the key elements of the economic reform proposals. It then looks at the key elements of a developmental state after which it assesses the extent to which Zimbabwes key reform proposals would enable it to meet the minimal requirements of a develop-mental state. The paper concludes by offering an assessment of the chances of success for the economic reform measures.Key elements of Zimbabwes economic reform measuresAll reform programs be anchored on economic stabilization, increasing productivity and t urning Zimbabwe into a developmental state. In the key policy pronouncements announced in STERP (February 2009) and the Medium Term Plan, Government of Zimbabwe (GoZ) had two tether objectives. First, it execute out to use domestic savings and inappropriate finance to carry out in the public eye(predicate) investment jut outs and to mobilize and channel scarce resources into argonas that can be expected to make the greatest parcel towards the realization of long term economic objectives. These include measures to stabilize the macro and micro-economy, recover the levels of savings, investment and growth, and lay the basis for transformation from mid-term to long-term economic programs that will result in economic growth and reducing of poverty levels.In so doing, the reform programs, as espoused in article 3 of the September 2008 orbiculate Political Agreement (GPA) tellk to address the key issues of economic stabilization and national healing, whilst at the similar time p lace the foundation of a more comprehensive and developmental economic framework. The second is to discover that economic policy (e.g. taxation, industrial licensing, the setting of tariffs and the manipulation of wages, interest rates and prices) stimulates direct and in few cases control cloistered economic activity to ensure harmonious relationship between the desires of private concern operators and the social objectives of establishment policy. Some of the key features of the policies include the adoption of a cash budgeting system use of multiple currencies as legal tender and adoption of the rand as a reference currency and the take down of contrasted currency controls among new(prenominal) measures.Theoretical frameworkA starting point in exploring the theory of a developmental state is the developmental state literature that gained currency following the phenomenal economic performance of the East Asiatic countries in the 1970s. Meredith Woo-Cumings (1999 1) descri bes the theory of develop-mental state as the explanation for the East Asian industrialization. This theorizing represents one of the first attempts to integrate giving medication and private sector decision making. Earlier theorists such as Downs (1957) had noned a trend in economic theorizing which treated government perform as an exogenous variable determined by political considerations that lie outside the purview of economics.The earlier view equal a carryover from the classical premise that saw the line of credit as a self regulating mechanism. every government action beyond maintenance of law and order was seen as undesirable interference. Edigheji (2005) has analyzed a number of variations of the literature on the developmental state and notes two strands of theorizing. The first set of theories focus unaccompanied on the developmental goals of the state (e.g. Castells, 1992). These theories argue that state is developmental when it basees as its principle of legitim acy its business leader to leaven and sustain development (understood as the combination of steady and high rates of economic growth and structural change in the productive system) both domestically and in its relationship with the international economy. thereof a developmental state is seen as one which is able and willing to create and sustain a policy climate that promotes development by fostering productive investment, exports, growth and human welfare (Ponk, in Edigheji, 2005). The second strand of theorizing looks beyond the objectives to focus on the institutional voiceistics of the state and draws attention to the ideological character of the development state. Mkandawire (2001) has referred to this as the state-structure nexus that enable the state to be able to achieve growth and development while others cannot. A premium thus has to be placed on the institutional/organizational configurations of the developmental state. This is primarily because what sets a developmen tal state apart from others is that not alone is it able to extendly set its development objectives it too establishes institutional structures in order to achieve the objectives.Locating the role of the stateIn this paper, a developmental state is defined by its objectives and its institutional characteristics. It is one whose ideological underpinnings are developmental and one that seriously attempts to construct and deploy both administrative and political resources to the task of economic development (Mkandawire, 2001296). The role of the state needs to be clarified given the contradictory nature of the literature on the East Asian cases. Earlier theorizing initially conceived a developmental state in terms of the state imposing its will over society and suppressing civil society. and then they argued that the developmental state paid no heed to the democratic aspect of the developmental state. This is partly because some scholars regarded the repressive nature of the state as one of the factors that enhanced its developmental capacity.For some scholars, the soft authoritarian character of the state was the source of its familiarity which encouragered growth (e.g. Johnson, 1982, Wade, 1990). This is because a developmental state has existed in authoritarian Korea and Taiwan as well as in democratic Japan. In fact, Japan was the first East Asian state to be considered a developmental state (Bolesta, 2007107). Despite the nature of government, in a true developmental state, the bureaucratic rulers give birth a particular kind of legitimacy that allows them to be much more experimental and undoctrinaire (accommodative of new ideas) than in the typical authoritarian regime (Johnson 1999 52).However, Leftwich (1995 405) has identified six study components that define the developmental state model. These are a determined developmental elite recounting autonomy a powerful, competent and insulated bureaucracy a weak and subordinated civil society the effe ctive focal point of non-state economic interests and legitimacy and performance. The characterization of the democratic elements in Leftwichs model closely mirrors the situation in Zimbabwe prior to 2009 and may not be encouraging looking forward.Zimbabwe had an increasingly authoritarian governance style since the late 90s (Sachikonye, 2002) all the same its economic policies saw a continuing decline in key economic indicators. In analyzing the economic reforms policies in Zimbabwe this paper so draws more from theories that strike stressed the cooperative dynamism of the developmental state. For example, following a detailed analysis of the states relationship with business, Linda Weiss (1998 258) came up with the concept of governed interdependence where she conceptualized that there are collaborative relationships between government and business in pursuit of transformative projects.She notedIn this relationship, each party retains its independence, while government remai ns the ultimate arbiter of the rules and goals of interaction in which information is exchanged, resources are pooled and tasks shared, (Weiss, 1998 258).Zimbabwes neighbour, Botswana, is an illustration of a state that has pursued certain policies in the construction of what might be regarded as a developmental state i.e. a state that pursues policies that co-ordinates investment plans has a national development vision- implying that the state is an entrepreneurial federal agent that engages in institution-building to promote growth and development andplays a role in domestic conflict management (Chang, 1999 192-199).Assessment of Zims post Z$ economic reform policiesThe economic reform policy measures are assessed in relation to how the enhance Zimbabwes progress towards the attainment of developmental state status. It is necessary to point at the onset that the key policy reform measures announced by the GoZ have been formulated and are being carried out inwardly the framework of a mixed economy i.e. some of the productive resources are privately owned and operated while some are controlled by the public sector. As Todaro and Smith (2010) have noted, the mere existence of such an institutional setup means that neither the private nor the public sector can be considered in isolation from each other.This acknowledgement of the interdependent role of the state and business is one of the few positive outcomes (discussed later) of the reform measures. However, a number of factors in the policy measures do not meet the minimal elements required for the country to attain development state status. These include the lack of a gullly and coordinated role of State institutions and weak premises for global re-engagement, both of which are deprecative for the success of the economic reform measures.Unclear role of the StateAccording to the MTP (2010), the policy measures seek to establish a platform for Zimbabwe to emerge as a vibrant Private Sector driven economy t hat is growing and transforming from a producer of primary products to a producer of diversified manufactured quality products laying the foundation of a competitive global player. The State will thus provide a conductive policy environment that will ignite Private Sector initiatives, entrepreneurship as well as promote a saving and investment culture. This statement sounds noble but there is nothing that has been said close organize the role of the many state players in the economic reform measures. The Ministry of Economic Planning is coordinating 13 sectors in a framework that in reality has shown to be independent of the other key ministries such as the Youth, Indigenization and Empowerment ministry, the Mines Ministry and the Local government ministries, to cite but a few.The countrys indigenization policy, supervised by the youth ministry, has been viewed as a threat to foreign investment in the nation. Whilst government has made assertions about the enforcement of the Act, several transactions have been concluded which show inconsistency in policy implementation. A case in point is government sale of above 50% of its shareholding in Ziscosteel to Essar naught in Mauritius in 2010 despite the conditions of the Act, which state that 51% of all businesses must be indigenously owned. (IH Securities, 2011) exacerbating this lack of coordination is the past record of State regulation which has in the past failed to facilitating a conducive environment for business by sections of the previous government. This has the effect of promoting rent-seeking behaviours and corruption in both government and the private sector. world(prenominal) financial institutions have noted this as a hindrance to the success of the economic reform measures.For example, in statement at the Conclusion of the 2011 Article IV Consultation Mission to Zimbabwe (IMF, 2011) the IMF noted that while stronger policies, a favorable external environment, and sizeable off-budget donor grant s supported a nascent economic recuperation and a notable improvement in the humanitarian situation during 2009-10, the macroeconomic outlook for 2011 remains highly uncertain, (IMF, 2011). The IMF cites among other things, an inefficient composition of public expenditure, persistent financial sector vulnerabilities, and weaknesses in the business climate, including the recently announced fast track indigenization of the mining sector. The State, which prior to the coalition government had become an arena for private crown accumulation, cannot extricate itself from excessive private sector regulation which has, in some cases, resulted in the violation of private property rights.A recent example of these excesses is the recent case that will be heard in the International Court in Paris. The case involves the GoZ and South Africa base Amari Platinum following the formers cancellation of joint mining ventures in 2010. The South African company had invested over $35 one million mill ion into the project where it partnered the Zimbabwe Mining Development Corporation. According to media reports, the company is demanding compensation of $200 million, (Sunday Times, October 9th 2011). Autonomy, which is a crucial element that supports growth in a developmental state, means the ability of the state to behave as a consistent collective actor capable of identifying and implementing developmental goals (Edigheji, 2005). in that location is therefore need for structural reforms.These would include alignment of indigenization and mandate objectives with respect for private property rights and the need to attract domestic and foreign investment. While these recommendations appear individually, they point to the failure by the reform policies to clearly spell out the role of the State in the economic reform process. Crucially, and related to the role of the State, is the fact that there has not been any systematic attempt to epicurean the concept of the developmental st ate in Zimbabwe.Besides passing reference in the objectives of all plans, government has not specified the sources of its capacity, other than regular lamentation about the need to build the skills capacities of the public sector. Thus crucial institutional elements that would enable the developmental state to act in a coherent work and, on that basis, successfully engage with its social partners have been either taken for granted at topper or ignored at worst.Weak to zero premises for global re-integrationThe policy measures recognize the level of debt currently besetting the country and its impact on badly needed financial inflows, yet it is not clear how this debt will be cleared. According to the MTP the success degree that Zimbabwe is becoming will in itself unlock other sources of funds. The few investments funds already in the country will soon become a multitude. Investors exchangeable a place where a dollar can be made and Zimbabwe provides such an opportunity.This in it self sounds akin a work of faith. Whilst trust plays a crucial role in policy implementation, the assumption that only success can unlock lines of credit and provides a stimulus for the productive sector is not based on evidence. The huge debt which will result in high future taxes if the countrys major sectors of the economy do not increase their operating capacity against a background of inadequate foreign aid. It could be that it is a carrot in the stick for those elements of government that are likely to derail reforms, yet experience in the past has shown that it is not success that drives politicians, but the ability to create and generate comme il faut wealth prior to the next elections. Reducing poverty under such policies becomes a farfetched vision that will not be recognized. There is need to strengthen internal revenue generation and hookup in areas such as tourism, agriculture and mining to finance internal and external debt while also providing resources for the pr oductive sectors such as agriculture and manufacturing.Alternatively, the country could attain Highly Indebted Poor bucolic (HIPC) status to enable international debt relief. The experience of Zambia shows that total external debt reduced significantly by 8.9 percent from US$7.12 billion in 2001 to US$6.49 billion in 2002 as a result of the HIPC curtain raising (Zulu, 2003). HIPC status could be tied in with the strengthening of light trade policies. Despite being a signatory to numerous trade pacts, Zimbabwe has maintained numerous import controls as reflected by the high tariffs relative to other countries in the region (Hurungo, 2010). The countrys reluctance to reduce tariffs is due to its over opinion on the revenue generated (Biti, 2010) Economic literature on the relationship between restrictive or open trade policies and economic progress has been inconclusive. Multilateral institutions such as the World Bank (WB) and the International fiscal Fund (IMF) regularly promul gate advice predicated on the belief that openness generates predictable and positive consequences for growth.According to the IMF, for instance, policies toward foreign trade are among the more important factors promoting economic growth and convergence in developing countries, (IMF, 199784). This view is supported by a vast array of literature on trade. For example, Stiglitz (199836) noted that most specifications of observational growth regressions find that some indicators of external openness- whether trade ratios or indices or price distortions or average tariff level- is strongly association with per-capita income growth. other(a)s have made similar observations noting that integration into the world economy is the beat way for countries to grow, (Fischer, 2000).Thus Zimbabwes strategic reintegration with traditional trade partners could spur growth if value plus is considered for some export products. History has shown that there is no positive relationship between expor ts and growth in Zimbabwe. For much of the period when Zimbabwe experienced negative growth rates (between 1997 and 2009), it experienced a trade superfluous with South Africa, the European Union and the United States (ZimTrade, 2009). Such trade surpluses need to be tapped into in a new economic and political environment fostered by the coalition government so as to spur economic growth and equity. However, there is no acknowledgement of these facts.Stabilization as a success storyIt should be noted that a significant proportion of the policy measures have had a positive effect- which has resulted in economic stabilization. The adoption of multiple (excluding the Zimbabwe dollar) had the immediate impact of eliminating hyperinflation. Annual inflation declined from an official figure of 231 million in July 2008 to 0.5 percent in December 2009 and 3.5 percent in July 2011, according to the Central Statistical portion (CSO). According to the IMF (April 2011), the Governing Board of the RBZ (which was appointed in May 2010) has achieved a significant improvement in central bank governance, reporting, and organizational restructuring although further steps are needed to accelerate financial restructuring of the financially-distressed RBZ.There was also a significant improvement in product availability in retail and sweeping outlets, with capacity utilization having markedly improved which also witnessed an improvement in the performance of the overall economy. For instance, in 2009 the economy was estimated to have grown by 5.7 percent and the average for SADC was 2.4 percent and 2 percent for sub-Saharan Africa. While this stabilization, within the theoretical framework of the developmental state, can be seen as progress, it is easy to see that the economic decline had hit rock bottom and the desire is to bring levels of productivity to 2000 levels.The World Bank has estimated that it will take another decade with a growth rate of 10 percent per annum to bring rates to 2000 levels. In June, the IMF said Zimbabwean growth is set to slow sharply in 2011and the countrys recovery from a decade-long deep economic contraction remained fragile (IMF, 2011). An IMF review of Zimbabwes economy projected that economic growth would drop to 5.5 percent in 2011 from 9.0 percent in 2010. It said the country was in debt distress with a large unsustainable external debt stock of 118 percent of gross domestic product as of the end of 2010, the people of which was in arrears.ConclusionThis paper has provided a framework for understanding Zimbabwes economic reform policies within the framework of a developmental state. Though not exhaustive, the developmental state has been defined based on its institutional attributes of being autonomous and coherent. In addition, the developmental state is one that forges broad-based alliances with society and ensures popular fellowship in the governance and transformation processes. Elements of the Washington Consensus and other classical economic theory have been brought to tire on previous economic reform programs and there is evidence that these continue in current reform policies.The classical theories do not take into account the unique circumstances of a country, especially the different types of government. In spite of the type of government, a developmental state is guided by the goals of coherence and authoritative governance, accountability, inclusiveness, stability, ability to generate consensus and popular participation- none of which are visible in Zimbabwes political and economic outlook.Much of the work towards the attainment of a developmental state hinge on Zimbabwe providing and implementing a clear definition of the role of the key players- the state, private sector and civil society- in the proposed economic reform measures. Other measures include forging a clear partnerships with local and international players- with parameters of engagement with the latter based on realist ic economic policy measures as well as an engagement path that takes into consideration Zimbabwes trade surplus with the major international economic blocks such as the European Union, SADC and the United States. Without this, as seen in current reform policies the chances of success of the reform measures are limited.ReferencesAfrican Development Bank Group, 2011, al-Qaeda and Growth in Zimbabwe- An Action Plan for Sustained Strong Economic Growth, Tunis, TunisiaAfrican Development Bank Group, 2010, Zimbabwe Country Brief, Regional Department, South Region A, January 2010.Biti, T 2010 2010 Budget Speech. Ministry of Finance (28 January)Castells, M., 1992 Four Asian Tigers with a Dragon Head A Comparative Analysis of State, Economy and Society in the Asian Pacific Rim. in Applebaum R, Henderson J (eds). State and Development in the Asian Pacific. Newbury Park Sage Publications.Chang, H-J (1999) The Economic scheme of the developmental State in M. Woo-Cumings (ed.) The Development al State New York Cornell University.Downs, A., 1957, An economic theory of political action in a democracy. 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