Recent Economic Developments
National Development Strategy: The Government in 2013 adopted the five (5) year development policy blueprint – the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-ASSET, 2013-2018). The Zim-ASSET aims to achieve sustainable development and social equity, propelled by the judicious exploitation of the country’s human and natural resource endowments. It focuses on four major clusters, namely: Food Security and Nutrition; Social Services and Poverty Eradication; Infrastructure and Utilities; and Value Addition and Beneficiation.
To buttress the aforementioned clusters, two sub-clusters were also developed, namely Fiscal Reform Measures and Public Administration as well as Governance and Performance Management. The policy blue print also intends to accelerate the re-engagement process with international financial institutions and other creditors on arrears clearance, debt relief and new financing in support of the country’s development projects.
The GoZ has further developed a new interim poverty reduction strategy paper (I-PRSP). The I-PRSP comprises five pillars, namely: (i) Agriculture Productivity, Growth and Rural Food Security, (ii) Social Sectors, (ii), (iii) Private Sector, (iv) Infrastructure, (v) Environment and Climate Change, (vi) Gender, Women and Youth Empowerment, and (vii) Governance and Institutional Capacity.
GDP growth and growth drivers: The economic outlook for 2017 comes against a background of above normal rainfall received almost across the country. GDP growth is projected at around 3% in 2017, from the initial projection of 1.7%. The agriculture and mining sectors are projected to underpin the anticipated growth. Government of Zimbabwe has introduced various agriculture funding facilities and the mining sector benefited from good international commodity prices.
The mining sector remains very lucrative, with some of the world’s largest platinum reserves being mined by Anglo American plc and Impala Platinum. The Marange diamond fields, discovered in 2006, are considered the biggest diamond find in over a century. With the exception of gold, mineral prices have remained depressed during the period to end October 2016. However, the budget projects a modest mining growth of 0.9% in 2017.
Zimbabwe boasts several tourist attractions which include the Victoria Falls, which is amongst the Seven Natural Wonders of the World. The tourism sector is expected to grow by 0.8% in 2017 and this will be enabled by the removal of barriers to free movement of tourists into and within the country.
Monetary Policy and Financial Sector (monetary policy stance, inflation dynamics Monetary Policy and Financial Sector: In February 2009, Zimbabwe adopted a multi-currency regime in which the economy managed to stabilize from an episode of hyperinflation experienced in 2007/8. Against the background of tight liquidity and 2 cash challenges, the Government in November 2016 introduced Bond Notes pegged at par to the US$, imposed limits on daily cash withdrawals and cash carried outside country, and a 5% bonus on export receipts.
According to the Monetary Policy Statement for January, 2017, the banking sector’s aggregate core capital increased by 7.48%, from US$1.07 billion to US$1.15 billion, during the quarter ending 31 December 2016 on the back of satisfactory earnings performance. As at 31 December 2016, all operating banking institutions were in compliance with the prescribed minimum capital requirements. The capital adequacy ratio stood at 23.7%, which was well above the regulatory threshold of 12% while the average prudential liquidity ratio for the banking sector was 61.91%, above the stipulated minimum regulatory requirement of 30%. Notwithstanding the high average prudential liquidity ratios recorded across the sector, the banking industry continued to experience underlying physical US$ cash challenges
Fiscal Policy and debt (fiscal policy stance; debt strategy, debt structure, management, and sustainability): The fiscal position is constrained owing to the continued underperformance of revenues and increase in recurrent expenditures. The fiscal deficit for 2016 is estimated at US$1.042 billion (7.3% of GDP), a marked increase from the target of US$150 million. Government in 2016, increased domestic financing of the budget. Domestic public debt rose markedly by about 85% from about US$2 billion in 2015 to about US$3.7 billion by 31 October 2016 following the takeover of the RBZ debt by the government through the Debt Assumption Act which saw the government assuming the RBZ’s US$1.4 billion debt and debt of a number of parastatals.
The country remains constrained by a high external debt overhang. In October (2016), Zimbabwe cleared its arrears amounting to US$107.9 million to the Fund’s Poverty Reduction and Growth Trust (PRGT) by drawing down on its Special Drawing Rights (SDRs) holdings held at the IMF. The country still has outstanding arrears of about US$601 million with the AfDB and US$1.1 billion with the World Bank.
External Sector: Despite some slight improvements, the external position remains precarious with large current account deficits and low international reserves. According to the Monetary Policy Statement by the Reserve Bank, merchandise exports declined by 6.9%, from USD 3.6 billion in 2015 to USD 3.3 billion in 2016. Merchandise imports declined by 11.7% to USD 5.3 billion in 2016 from USD 6.0 billion over the same period in 2015.
Socio-economic developments/trends: The prevalence and incidence of poverty remains very high in Zimbabwe. Individual poverty prevalence for Zimbabwe dropped from 75.6 percent in 1995 to 70.9 percent in 2001 and then rose to 72.3 percent in 2011. However, persons in extreme poverty have also declined from 47.2 percent in 1995 to 41.5 percent in 2001 then further down to 22.5 percent in 2011. Household poverty is estimated at 62.6 percent which is slightly higher than 60.6 percent in 2001 and lower than 63.3 percent in 1995/96.
To improve the business environment, government is working on reforms to streamline and simplify regulations affecting market entry, exit and competition. The government launched the second 100-day Action Plan to accelerate ease of doing business reforms in Zimbabwe in February 2016. The first 100-day Rapid Results Action Plan, which was launched in September 2015 produced a number of achievements, including reducing the number of days it takes to register a property from 36 to 14 days and reducing the time taken to pay taxes from 242 to 160 hours. Key reforms under the second phase include amending the Companies Act, Shop Licensing Act and the Procurement Act.
Environment and Climate change: Zimbabwe is highly vulnerable to environmental degradation through deforestation, loss of biodiversity, excessive soil erosion, contamination, pollution and excessive exploitation of water resources. This has been exacerbated by global climatic changes which have led to changes in rainfall pattern, frequent droughts, floods and rising temperatures. The resource base has been stressed by increase in population and competition for natural resources. The prevailing energy crisis has forced most people to rely heavily on natural resources thereby leading directly to biodiversity loss. Increased deforestation has seen an annual estimated loss of 100,000-320,000 ha forest cover.
Natural Resource Endowment: Zimbabwe produces more than 40 types of metals and minerals and has extensive reserves of gold, platinum, chrysolite, asbestos, chromite, iron ore, lithium ore and coal. The country further has abundant wild life and is bordered by two major rivers – the Zambezi and Limpopo rivers which have been important sources of hydro energy.
Regional Economic Integration: Zimbabwe is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). With its geographic positioning, bordered by other countries, Zimbabwe has served as transit route in and out of South Africa for–Zambia, Malawi and Tanzania.