Zimbabwe’s economic trajectory since 2018 is full of a series of challenges. These include global headwinds, structural bottlenecks and price and exchange rate instability. However, despite these challenges, the country has demonstrated resilience and potential for future growth. Zimbabwe’s path to all round progress is showing some potential.
Economic Growth and Challenges in Zimbabwe’s Path
Real GDP growth has remained high, driven by agriculture and services, particularly tourism. However, the manufacturing and mining sectors have faced slow growth due to factors such as electricity shortage, inflation and exchange rate pressures. The fiscal balance has turned into a deficit due to a high wage bill, high interest payments from quasi-fiscal operations (QFOs) and resumption of spending after elections.
Also, persistent inflation, high dependence on low-productivity agriculture and slow structural transformation have contributed to high rates of poverty and vulnerability. Regarding agriculture, the government is working to mitigate some of the challenges. Improving irrigation schemes through dam construction is underway. Additionally, High, unsustainable debt and arrears to international financial institutions (IFIs) continue to limit fiscal space and growth potential. Although, the government is working on ways to deal with debt clearance and improve Zimbabwe’s path towards development.
The Zimbabwe Reconstruction Fund (ZIMREF), now renamed the Zimbabwe Socio-Economic Transformation (ZISET) Fund, is playing a pivotal role in supporting legislative reforms and early reform implementation. Moreover, key results include enactment of 22 pieces of legislation on procurement, public enterprise governance, national statistics, and business regulation.
Public-Private Partnerships (PPPs)
The government is promoting PPPs for infrastructure development. PPPs are long-term contractual arrangements where the private sector provides infrastructure assets and services traditionally provided by governments. Also, there is risk sharing between the private player and the public sector. This approach will help improve the country’s infrastructure. This is seen as a barrier to economic growth.
National Development Strategy (NDS)
The government launched the 2021-2025 National Development Strategy (NDS), which aims to attract both domestic and international investors. The NDS recognises that bold and transformative measures are required to drive economic growth. Additionally, highlights the importance of creating a favourable environment for private investment. It also emphasises the need to leverage Zimbabwe’s competitive advantages, including its natural resource endowment, excellent ecological endowment, and skills base. The NDS’s potential to improve Zimbabwe’s path to growth is commendable.
However, the government’s role in the economy is exceptional for a country of its population size and income level. This could be a significant obstacle to growth. A conservative estimate puts total public spending—including expenditures by the central government, local authorities, and state-owned enterprises and parastatals—at roughly 50 percent of Zimbabwe’s GDP. Moreover, this high expenditure will continue to cripple economic growth if counter measures are not exacted.
Despite these challenges, Zimbabwe has strong foundations for accelerating future economic growth and improving living standards. The economy has excellent human capital, comparable to that of upper-middle-income economies in Sub-Saharan Africa. Moreover, Zimbabwe possesses abundant mineral and natural resources that, if well managed, can support the country’s development objectives.
In conclusion, Zimbabwe’s path since 2018 has been marked by both challenges and potential. The country’s future growth will depend on its ability to address economic imbalances, manage its debt, and effectively manage its public sector. Despite the difficulties, there are signs of resilience and potential for future growth, particularly in sectors such as agriculture and tourism.