News Analysis: Zimbabwe's Mugabe to Contend With Economic Woes

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Last updated at: (Beijing Time) Thursday, March 14, 2002

News Analysis: Zimbabwe's Mugabe to Contend With Economic Woes

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As Robert Mugabe's new government is in office for another six-year term, economic analysts say it must quickly address Zimbabwe's food shortages and the economic issues of a high inflation rate, shortage of foreign exchange and high domestic and foreign debts.

Once a regional economic powerhouse in southern Africa, Zimbabwe was the only regional player to export food to Ethiopia during the drought in the 1980s. Its economy was doing well, and its people were well educated and richer than many of their regional peers.

But over the last five years, things have got harder as the country's economy is on its knees, battered by years of mismanagement and global recession.

For three years, economic growth has been negative, and is expected this year to be even serious at as much as negative eight percent.

The country's Ministry of Finance said local debt is more than 200 billion Zimbabwean dollars (about 3.6 billion U.S. dollars) and foreign debt stands at 55 billion Zimbabwean dollars (about 1 billion dollars).

Also, a famine is looming large, with the World Food Program warning that nearly half a million of Zimbabweans are short of mealie meal, the country's staple food.

Meanwhile, analysts predict the international community would continue being hostile to the government and foreign direct investment would remain low.

The international community which is against the current government because of the land redistribution exercise has said it will revive sanctions after the elections.

This, coupled with inflation of 116.3 percent as of January, unemployment of around 60 percent and scarcity of basic commodities due to business closures, make the task of putting back the economy on the rails, a daunting assignment for the winner of the election.

Analysts say the new government must address these issues which had been left unattended for some time as the country moved into an election mode.

They say Mugabe's government has to establish a viable exchange rate for exporters, address high inflation and high domestic and foreign debts, and improve the country's international image.

Though the interest rates were deemed low in Zimbabwe, they were still high compared to those of the country's trading partners, the government should retain the low interest rate regime for the next two years for it to bear fruit, the analysts say.

They say the new government has to address the problem of food shortages, adding that the issue of economic survival is of importance against the background of drought.

Food, they say, has to be imported to save the country from starvation.

Because of the shrinking revenue base, the government resources will be constrained as they will be diverted to food importation.

It's important for the government to extend bank guarantees to financial institutions, which can fund infrastructural and industrial development projects, according to those analysts.

During the election campaign, Zimbabweans across the country listed the economy as their number one concern, telling their leader-to-be to give this top priority as soon as he assumes office in coming days.

Although Mugabe mapped out a Millennium Economic Recovery Program, analysts have doubts about the merits of the government' s economic plans.

Under its blueprint, the government hopes to stabilize the economy through curtailing state expenditure, reforming public enterprises and expanding agriculture.

Much emphasis is put on the key agricultural sector, where the government is taking over idle farms from white farmers, who control the bulk of Zimbabwe's arable land, to resettle blacks to boost production.

Agriculture is the backbone of the country's economy, accounting for up to 60 percent of export earnings, and the government hopes expanded production by 500,000 black resettled farmers would jolt the economy back into life.

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