The potential is immense . Since 2013, Zimbabwe has completed three Staff Monitored Programmes (SMP) under the IMF. Such an SMP, while it is an informal arrangement where IMF staff assess a country’s economic situation, make recommendations and periodically review its progress in implementing reforms, gives pointers to where the economy should be heading.
In all these programs the IMF has consistently maintained that Zimbabwe needs to make painful but necessary adjustments – cut government expenditure and reform state owned enterprises and parastatals.
So it is safe to say that we already know what needs to be done to turn around this economy. When Patrick Chinamasa was finance minister, the country had already started to make some headway in this regard but was frustrated at every turn by Mugabe.
Mugabe’s obsession with populist policies would not allow him to cut government subsidies or trim the public service, but instead he insisted on paying bonuses even when government could not afford to.
This was a man who, after all declared in 1998: “Who ever heard of a country going bankrupt?”
Zimbabwe has 107 state owned enterprises and parastatals, which contribute a paltry 2 percent to the country’s Gross Domestic Product (GDP) from a peak of 40 percent in the 1990s. Last year, about 38 of the state-owned enterprises and parastatals ran cumulative losses of $270 million.
More than half of these public institutions are technically insolvent, relying on government bailouts.
Not only are they a drain on the fiscus, but fertile ground for corruption, cronyism and patronage because of poor corporate governance and a culture of impunity.
Reforming state owned enterprises would certainly go a long way in restoring confidence and trust in public institutions and also easing pressure on the exchequer.
Zimbabwe’s deep seated problems require a massive culture shift.
Investors the world over, just like the long suffering Zimbabweans, are waiting to see early signs of whether Mnangagwa will be more pragmatic and prudent in his economic policies, and more uncompromising towards corruption, than his predecessor was.
Expectations are high and Mnangagwa, as he noted, has to hit the ground running. But the reality is that cleaning up Mugabe’s mess will take time. It will not be as quick or as dramatic as his fall from power.- The Source
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