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Thursday, December 3, 1998 Published at 16:40 GMT

Political conspiracy or economic mismanagement?

Economists warn planned appropriation of private farms will hit production badly

By Economics Analyst Andrew Walker

Zimbabwe has a history of erratic economic performance - poor in some respects and real progress in others. Its most recent problems have included mass strikes - met with a temporary ban - in part a response to a recent rise in fuel prices.

Zimbabwe Congress of Trade Unions leader Morgan Tsvangirai: The government will have to move towards democratisation
The international financial institutions - the World Bank and the International Monetary Fund - have had some concerns about the Zimbabwean economy for many years.

There have been persistent and large deficits in the country's trade with the rest of the world and in the government's finances.

[ image:  ]
Government borrowing has often been more than ten per cent of total economic output, or GDP. In 1997 it was eight per cent - compare that with Europe's target for countries joining the single currency of three per cent.

And Zimbabwe's deficit in its international trade was bigger than Thailand's in the run-up to the Asian crisis last year.

That deficit was a factor behind the huge decline in Zimbabwe's currency last year, which pushed up import prices. That in turn sent inflation climbing in the first few months of this year.

Reforms patchy

The World Bank has also expressed its disappointment at the slow progress of reform in state-owned enterprises, an area where many observers say there is extensive corruption. In the 1980s, slow economic growth meant that average living standards declined.

[ image: Riots early this year in Harare were sparked by an announcement of food price rises]
Riots early this year in Harare were sparked by an announcement of food price rises
Zimbabwe has, however, had plaudits from time to time. The World Bank describes the array of structural reforms introduced since 1991 as impressive - these are reforms intended to make Zimbabwe more of a market economy.

There have also been important social achievements, in spite of the disappointing economic growth.

By 1990, life expectancy had risen to 64 years, and infant mortality, school enrolment and adult literacy were all better than the average for the developing countries.

More recently, Zimbabwe has improved its relations with the International Monetary Fund to such an extent that the IMF approved a new credit of 175 million US dollars for Zimbabwe in June.

[ image: Price rises have hit ordinary people hard]
Price rises have hit ordinary people hard
It is intended to provide the country with a financial breathing space, to restore the confidence of the financial markets. Under a new economic programme, the IMF forecasts impressive reductions in those worrying imbalances - in the public finances and international trade.

If it all works out as the IMF forecasts suggest, Zimabwe should enjoy a much needed acceleration of economic growth next year.

IMF concerns

Nonetheless, the IMF is clearly uneasy about some aspects of Zimbabwe's policy, including some where there has been more widespread international criticism.

  • One is land reform, the plans to confiscate farming land currently owned by the country's white minority.

  • Another is Zimbabwe's military action in its neighbour, the Democratic Republic of Congo. The IMF's concern is not about the merits of these cases in themselves - those issues of principle are for the international community to pursue in ways other than through the IMF.

    The reason the Fund is concerned is because of the possible implications for public spending. It is hard to exaggerate the importance the Fund attaches to getting the public deficit down.

  • There are also concerns that too hasty a move on land reform could lead to a wider loss of confidence in the economy and to falling food production. Earlier this year riots followed rises in food prices. Problems in food supply would be problem that Zimbabwe cannot afford economically or socially. Mr Mugabe can't afford it politically either.

What the IMF has not factored into its forecasts is the simmering discontent manifested in the most recent strikes.

And it will not be easy for the Zimbabwe government to achieve the targets for strengthening the public finances. They will need to make a success of that if the IMF's financial support is to continue.

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In this section

Mugabe's long shadow

Political conspiracy or economic mismanagement?

Mugabe's unpopular war

Land battle sets black against white

Mugabe faces economic anger

Meeting Mr Mugabe

Zimbabwe's history: Key dates