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Zimbabwe faces long painful road to health
William
Wallis, Financial Times
September 19, 2008
http://www.ft.com/cms/s/0/0a77c1d6-85a4-11dd-a1ac-0000779fd18c.html?nclick_check=1
Even if all
goes well, it could take more than 12 years for Zimbabwe's
economy to recover peak levels of per capita income reached in 1991,
according to a United Nations Development Programme (UNDP) report
seen by the Financial Times.
The report, "Comprehensive
Economic Recovery in Zimbabwe", is due to be published on
Friday. Researched and written by five Zimbabwean economists, it
is the first economic assessment to be published in the wake of
this week's power-sharing agreement between the veteran autocrat
Robert Mugabe and his opposition rival, Morgan Tsvangirai, now prime
minister designate.
Over 239 pages it charts
the radical and, in many cases, painful policy measures necessary
to revive the country's fortunes following a decade of crisis
that has ravaged the economy and eroded the state's institutional
capacity to respond.
A minimum of $5bn (€3.5bn,
£2.7bn) in foreign aid, including debt relief, will be needed
over the next five years - $1.62bn of that in the first year
- if the government is to plug financing gaps, revive infrastructure
and stave off hunger among the 5m Zimbabweans threatened by starvation.
This would make it one of the largest recipients of aid in Africa.
Those figures would be
significantly higher if pensioners were reimbursed for savings eviscerated
by the collapse of the currency, and thousands of white farmers
driven from their land by Mr Mugabe's resettlement programme
compensated.
"Without substantial
foreign assistance sustainable economic recovery will be impossible,"
the report says, adding that the manner in which Zimbabwe tackles
structural problems at the outset could determine whether it becomes
aid-dependent or able, in the long term, to sustain its own development.
The report spares few
details in portraying the scale of the task facing any government
to emerge from the wrangling over cabinet positions. Farm production
has more than halved in a decade, starving the manufacturing sector,
once among the most developed on the continent, of raw materials
and creating conditions for mass starvation. Tourism has petered
out, while the HIV-Aids pandemic has contributed to reducing life
expectancy from 57 to 37 years.
At the same time, at
least 2m of the 12m population have emigrated to South Africa, the
UK, Botswana and other countries, many of them skilled workers and
professionals. Eighty per cent of medical personnel trained since
1980 have left the country.
A prerequisite for recovery
will be plugging vast budget deficits financed in recent years by
money-printing and credit creation. This has driven inflation to
a world record of about 40m per cent and created a nation of pauperized
trillionaires. The mechanisms used to tackle hyperinflation could
make the difference between a short-term bust followed by recovery,
and a near-term consumption boom followed by recession.
In a "lost"
decade Zimbabwe's economy has contracted 37 per cent,
while the rest of sub-Saharan Africa made average gains of 40 per
cent. It would take uninterrupted growth of 5 per cent annually
until 2020 to recover peak per capita income levels. A more likely
average is less than 4 per cent, the report's authors suggest.
The government will need
to act decisively at the outset when "opposition to radical
reforms is likely to be weakest", the report argues, warning
of the dangers of "a constrained decision making fostering
consensus style compromises that both delay and undermine reforms".
Britain, the US and the
European Union have all reacted cautiously to last week's
deal, partly because they believe this is the most likely scenario.
Bilateral donors could
step in quickly, one senior western official said, if they are convinced
the new government is able to carry out reforms. However, this will
be dependent on clear signs that Mr Mugabe, in power since 1980,
whom they blame for the crisis, has been sidelined.
Longer-term budgetary
support - of the type the UNDP suggests will be vital to stabilise
the economy - will be dependent on Zimbabwe's agreeing
a programme with the International Monetary Fund.
"We want to help
Tsvangirai but he has to drive a wedge in. We are not going to put
money into a broadly unreconstructed Mugabe condominium,"
the official said.
Donors have yet to allocate
specific funds for Zimbabwe and recovery plans, seen by the FT,
of the Multi-Donor Trust Fund (MDTF) administered by the World Bank,
are still at a sketchy draft stage.
Talks to set
up a unity government in Zimbabwe got off to an inauspicious start
on Thursday when the two main parties declared deadlock over the
sharing of cabinet portfolios, writes Tony Hawkins.
It was the first meeting
of the main protagonists since Monday, when President Mugabe signed
away some powers to Mr Tsvangirai, the leader of the opposition
Movement for Democratic Change and the prime minister-designate.
According to state media,
Mr Mugabe told his party's central committee the move was
"a humiliation. . . Anyhow, here we are, still in a dominant
position which will enable us to gather more strength as we
move into the future" - comments that do not bode well
for the future of the unity government.
MDC officials are hoping
they can sideline Mr Mugabe if they gain control of the finance
and home affairs ministries at the least.
Nelson Chamisa, a spokesman
for the MDC, said negotiating teams would be charged with seeking
common ground at the talks.
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