Home » Business » A Sense of Déjà Vu [editorial]

THERE is an air of melancholy pervading despondent Zimbabweans, and this is not without reason. The country went through its worst economic meltdown in history, characterised by runaway inflation, commodity shortages and much more. The years 2000 to 2008 were therefore the most difficult period for Zimbabwe in its economic history.

Now, there is a foreboding sense of deacutejagrave vu, and it is not surprising. Since the country ditched its worthless currency in favour of a hard currency regime in 2009, the situation clearly looked like it had taken a recovery trajectory. The hard currency economy, which everyone in the country had desperately yearned for during the hyper-inflationary era, ushered in a period of stability.

The economy indeed stabilised, with Gross Domestic Product (GDP) growth averaging over seven percent between 2009 and 2010, and inflation has been kept within the low, single digit level. But this growth was nonetheless accompanied by very large current account deficits, and very low international reserves.

Between 2011 and 2012, sizeable public sector salary increases crowded out spending in key, productive areas, and the situation was compounded by significantly lower-than-expected revenues, which in 2012 resulted in fiscal stress. GDP growth moderated from over 10 percent in 2011 to an estimated 4,5 percent in 2012.

Then finance minister Tendai Biti was forced to significantly adjust the national budget in the second half of 2012, but long after government had started accumulating domestic payments arrears. The economy had, once again, touched a slippery slope, which hastened in 2013 and failed to relent this year. Now, as the year 2014 comes to an end, and the year 2015 beckons, that sense of melancholy is deepening.

A number of companies closed between last year and this year, with more people becoming unemployed. Projections are that it may get worse. The challenge therefore is for government to ensure it plays its part — the larger part — in ensuring that an environment conducive to economic growth is fostered.

The 2015 National Budget was short in this respect, largely due to the budgetary allocations which were skewed in favour of recurrent expenditure at a shocking 92 percent. There might be very little Chinamasa could have done to avoid this, but there is more he can do to ensure industry and commerce prospers and jobs are created to enlarge government’s revenue base.

Industry and commerce has been brought to its knees by the cost of utilities as well as unreliable power supplies. These are key economic enablers, to borrow from government’s common lexicon. They have to work, and work in the best interest of the economy. This is possible, provided there is political will.

Source : Financial Gazette

Archives