Zimbabwe crisis: Confidence is the missing link

Predictions by renowned world economic bodies and the government point towards economic recovery in Zimbabwe at least over the next 3 years.

Underlying this foreseen recovery is a projected sustained favourable rainfall pattern which is expected to buoy agriculture fortunes.

Moderate to strengthening regional economies are likewise projected to feed into this envisaged growth through enhanced regional trade, while recovering commodity prices are expected to redeem the waning economic growth.

To support the projections, recent economic data released by relevant authorities shows that mineral exports have grown by over 25% in the 8 months period to August against the same period last year.

September revenue figures by ZIMRA shows a 14.3% outperformance to target.

In an October paper the IMF has since revised Zimbabwe’s growth projections upwards to 2.8% from an initial projection of 2%.

A favourable mineral earnings growth helps drive down the country’s external trade deficit which stands at a historic average of -$2.5 billion per year since 2009.

A positive external trade position increases forex supply while at the same time spurring economic growth through increased gross domestic product.

Revenue collections by ZIMRA are a springboard upon which the economy’s growth is launched.

Budgets are normally targeted against collections.

Keynesian economics postulates that increased budgeted for expenditure results in firmer national income.

A growth in the base (collections) will normally result in economic growth as measured by GDP.

Zimbabweans at every level have however refused to accept certain fallacies that are postulated from these projections.

There are strong market and general sentiments that the economy is instead shrinking when adjusted for various developments such as monetary and production.

These adjustments are sentiment driven.

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