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Economists: Political Solution Only Way to Save Zimbabwe


Days after the Zimbabwe central bank chief made his latest monetary policy statement, economists say it falls short of solving the country's economic problems. They say Zimbabwe needs international help to revive its economy. Most say that can only happen once Zimbabwe's political crisis is resolved.

Monday, Central Bank Governor Gideon Gono announced an array of measures aimed at reviving the economy. These include devaluation of the Zimbabwe dollar, a reduction of lending rates and incentives for the manufacturing and mining sectors to stimulate exports.

He also announced the removal of three zeros from the Zimbabwean currency in a bid to make it easier for consumers to carry out transactions in a hyperinflationary environment. But University of Zimbabwe economist Tony Hawkins thinks it is the latest in a series of plans to rescue the economy that is also doomed to fail.

"This situation can only be solved by some kind of political resolution in respect of Zimbabwe resuming access to international assistance; the World Bank, the IMF, donors like the European Union, Britain, the United states and so on," he said. "All these other measures are, so to speak, [are equivalent to] reshuffling the deck chairs on the Titanic. Everybody knows eventually there will be a day of final reckoning."

Zimbabwe's economy is facing serious challenges; the highest inflation rate in the world at close to 1,200 percent, high domestic debt, low manufacturing production and poor agricultural performance. These factors have led to more than 80 percent unemployment, fuel shortages, frequent power outages and foreign currency shortages.

Economist James Jowa also says Zimbabwe needs balance of payment support, but dismissed its Look East policy meant to strengthen trade ties with countries such as China

"The Chinese, they are just like anybody else, they are there to make money for themselves. They think of themselves first," he said. "Some of the deals that have been entered with the Chinese center on them extracting raw materials from us. What we need to do is to ensure that the politics is right, inside the country, the various groups, the various political formations, they need to come together to chart a way forward before we can expect the international community to intervene."

Economists blame several factors for the Zimbabwe's economic woes, beginning when the government made hefty, unbudgeted payments in 1997 to veterans of the war of liberation. Jowa says the country's military intervention in the Democratic Republic of the Congo also impacted negatively on the balance of payments.

A chaotic land-reform program launched in 2000 made a bad situation worse. Up to then, agriculture was the country's leading foreign currency earner.

The exercise was meant to dispossess white commercial farmers of land for the resettlement of landless blacks. But the new black farmers have failed to maintain production due to a lack of money for materials, lack of farming knowledge, and successive droughts.

The government blames the economic meltdown on, what it calls, sanctions put in place by western countries meant to punish Zimbabwe for taking away land from whites.

Meanwhile, Hawkins and Jowa agree that striking off three zeros on the currency is going to make life easier for consumers who had to carry piles of cash for simple transactions. The conversion to the new currency is set to be complete on August 21, but the changeover has been anything but smooth.

Banks still do not have all 13 new denominations, and while some banks accept checks with old denominations others are rejecting them.

This Harare businessman has to track down customers who paid him by check.

"I had some checks that were written in the old system, but they were returned to me saying they need them to be written in the new system, that is crossing off the zeros," he explained. "Yesterday, actually from the bank I had confirmed, and they said you can write using the old system, but today they returned the checks to me."

The government is upbeat about a long-term positive impact of its monetary policy statement, but economist Jowa does not share the authorities' optimism.

"I am not too sure where their optimism comes from," he noted. "I think these are people who have been cheering each and every policy statement the government has brought about. We have seen a number of development programs, I cannot name them there are too many, but on the ground things are not improving."

There is consensus that inflation is what Central Bank Governor Gono called the number-one enemy of Zimbabwe. But measures such as cutting interest rates are expected to push inflation upwards as more money finds its way onto the market.

Devaluation will, analysts add, make imports more expensive. They indicate the only solution is to get the economic sectors producing at full capacity again and for this to happen they say Zimbabwe has to come out of the political doghouse.