Section 2 of MDC-T JUICE economic agenda

SECTION TWO – THE CURRENT ECONOMIC ENVIRONMENT

1. Introduction

Zimbabwe has suffered a decade of decline and structural challenges that turned the country into one of the world’s worst performing economies, characterised by grinding poverty and high unemployment.

This policy outlines our framework for full economic recovery, with a return to sustainable and inclusive growth policies aimed at uplifting every Zimbabwean. JUICE is the pathway to macroeconomic stabilization, institutional and structural reforms that will restore hope and pride in our economy and spur long term economic growth.

Consistent with our vision to create a better future for our citizens, the MDC approach is a comprehensive economic strategy aimed at job creation, upliftment, capital investment and sound environmental management.

Through a cluster based development model, our policy approach will facilitate the development of economic growth nodes in peri-urban zones to create a more balanced economy, all of which is aimed at reducing high levels of unemployment, poverty and inequality.

2. Background and Recent Developments

2.1 Economic Improvements Since the Coalition Government It is no coincidence that following a decade of negative growth, the Zimbabwean economy stabilized when MDC became a partner in the coalition government1, which resulted in stabilization and recovery.

The coalition government adopted the multi-currency system (in which the US dollar, the South African Rand, Botswana Pula, the Euro, the British Pound became legal tender), cash budgeting approach, and the discontinuation of quasi-fiscal activities by RBZ helped to restore price stability and kick start financial intermediation.

Macroeconomic instability was one of the most critical shortcomings of the prior government. Once the MDC became a partner in government, the Short-Term Economic Recovery Programs (STERP 1 and 2) laid the foundations for the present macro-economic environment, which is characterized by an unprecedented degree of stability and low inflation.

Although this is not yet grounds for a developmental state, it does at least show that rapid economic growth is possible in Zimbabwe once macroeconomic policies are more realistic.

The economy responded by recording positive growth rates of 6 percent (2009), 8.3 percent (2010), 9.3 percent (2011) outperforming most countries in the region with average growth rates of 5 percent in the same period.

This was against a background of successive negative growth rates from 2000 to 2008 and record hyperinflation. It is all the more remarkable because during this period (2009-10) most countries in the world were recording negative or very low growth rates.

The biggest accomplishment of this turnaround was achieving single digit inflation following years of hyperinflation. Currently, inflation remains below 4.5 percent per annum, far lower even than neighbouring South Africa’s.

However, the impressive growth rates have not been accompanied by job creation, a commensurate reduction in poverty levels or increased capital investment to the degree required.

The Medium-Term Plan (MTP), a brainchild of MDC in the inclusive government, was also introduced, aimed at sustaining the economic recovery and addressing the problems of joblessness and non-inclusive growth caused by far deeper structural issues.

Such structural issues require the economy to be fundamentally transformed from its dual and enclave character to a more inclusive one.

The MTP set for the economy the target of an average growth rate of 7 percent between 2011 and 2015. Indeed this is a very conservative estimate of the country’s potential. It is now widely accepted that, given the right policy menu, Zimbabwe can do far much better.

Despite these early gains, there are still some weaknesses, which have threatened the recovery process. The main risks to the economic outlook include political instability, a decline in exports as a result of the global economic crisis, fiscal slippages, financial sector fragility and uncertainties created by policies such as the indigenisation policy.

JUICE is therefore a development framework for dealing with our long and short-term economic challenges. It will achieve inclusive and sustainable long-term growth. The first phase will be a vigorous program of consolidating the stabilization made under the Medium Term Plan (MTP). The short-term stabilization efforts are geared towards restoring domestic and international credibility to local businesses.

This will be achieved by creating an atmosphere for inclusive economic participation by improving political governance, policy consistency, respect for property rights and the rule of law and improving the business and investment climate.

The second phase will consist of structural reforms intended to provide a platform for strong sustainable long-term growth to address joblessness and the inequitable ownership of the economy.

The key drivers of economic growth with transformation will be investment, infrastructural development, agricultural and industrial recovery and labour market reforms. These objectives can only be reached with capable and committed leadership, which in turn requires that the MDC leads the next government of the Republic of Zimbabwe.