ZIMBABWE is likely to embark on International Monetary Fund (IMF)-sponsored economic reforms under President Emerson Mnangagwa’s new government, which is under pressure to curb an economic crisis economist Tony Hawkins has warned.
The University of Zimbabwe professor told delegates at an annual stakeholders’ conference on health hosted by the Association of Healthcare Funders of Zimbabwe (AHFoZ) in Victoria Falls that the reforms would be accompanied by pain, which could be far worse than the Economic Structural Adjustment Programme (ESAP) of 1991.
Describing the forthcoming economic reforms as ESAP 2, Hawkins warned: “The programme must tackle these five unsustainable aspects: Currency devaluation, fiscal and public sector retrenchment, the removal of subsidies and the abolition of protectionist policies such as SI 64, which will have far-reaching implications for all businesses.”
The Graduate School of Management head said ESAP 2 would be accompanied by modest growth in output and employment, and “steep currency devaluation” of between 50 percent and 60 percent.
There would also be sharply higher inflation and interest rates, and constrained credit access, he said.
The economic regime would also be characterised by increased taxation, cutbacks in government spending, large numbers of public sector layoffs, high utility tariffs and higher costs for public services — education, hospitals and many others.
Hawkins said Zimbabwe’s re-engagement with the international community will entail clearing $2 billion in arrears to multilateral funders, negotiating an IMF programme and getting the programme through the IMF board, some of whose members will be constrained from voting in favour of support to Zimbabwe due to the Zimbabwe Democracy and Economic Recovery Act, which directed that the US government should oppose the granting of any loan or financial assistance to Zimbabwe.
“It will be a lengthy process,” said Hawkins.
“Zimbabwe will negotiate a debt-restructuring deal with official lenders (donors) at the Paris Club and even if all goes well, this process will take months so that there is unlikely to be any inflow of official creditor financing before mid-2019,” he said.
He said there were potential obstacles to reforms and these included the fact that authorities believe no change is needed to the multiple currency regime.
“Only last week, the President re-stated his support for command agriculture. Other mainstream policies like SI 64, maize and wheat subsidies are obstacles to recovery,” said Hawkins.
“This is the free lunch world of Zanu-PF — gain without pain — in which the government continues its spendthrift, someone-else-will-pay, policies”
Fingaz