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Covid-19 complicates Zimbabwe’s economic and social conditions

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By Tanya Nyathi

The socio-economic impact of the Covid-19 crisis is real and the entire global community is feeling the heat.

For African economies, including Zimbabwe, which has been battling inherent bottlenecks that limit sound economic growth, the Covid-19 outbreak has piled misery, evidenced by the crippling impact of the pandemic on the viability of key productive sectors.

Since the spread of the pandemic to the continent early last year, major African economic sectors have been experiencing a slowdown as a result of the pandemic-induced shocks.

Tourism, air transport, manufacturing and the oil sector were visibly the most impacted due to disruption of global trading value chains, according to the African Union 2020 report.

This has brought to the fore the need for a paradigm shift towards changing trade patterns of African countries within themselves and with the rest of the world.

Indeed Zimbabwe and its Africa peers could turn the current Covid-19 pandemic into an opportunity if adequate interventions are put in place to cushion businesses and build stronger synergies towards inclusivity.

According to the latest Zimbabwe Economic Update (ZEU) Report issued by the World Bank, the Covid-19 pandemic has inflicted undesirable socio-economic strains on the economy.

Among the key highlights, the analysis for the country indicates the Covid-19 pandemic and its adverse impacts have disrupted livelihoods for many people, expanding the number of extremely poor citizens by 1.3 million, and increasing extreme poverty overall to 49 percent in 2020

The pandemic, says the World Bank, has further disrupted provision of basic public services in health, education and social protection, which were strained prior to the pandemic, affecting poor citizens the most.

In the absence of proactive action, the report warns that there is a risk of reversing some of Zimbabwe’s previous progress on human capital development.

Despite these risks, the multilateral finance body projects that the country’s Gross Domestic Product (GDP) growth would clock 3.9 percent this year.

This would be a significant improvement after a two-year recession, said the bank.

The positive growth projection is premised on the solid recovery of agriculture following good rains while businesses are gradually adjusting to limitations caused by the Covid-19 amid inflation slow down. The resurgence in commodity prices is also set to sour mining sector growth, according to the Treasury.

However, the bank states that disruptions caused by the pandemic will continue to weigh on economic activity in Zimbabwe, limiting employment growth and improvements in living standards.

The ZEU, with its focus on “Overcoming Economic Challenges, Natural Disasters, and the Pandemic: Social and Economic Impacts”, provides the World Bank perspective on macro-economic and poverty developments and discusses ways to strengthen public service delivery in key sectors.

This is the third economic update for Zimbabwe produced by the World Bank whose outcomes are a standard World Bank tool for macro-economic and fiscal monitoring.

While the ZEU notes endorses economic recovery path that has been projected by the Government, which is expected to strengthen further in 2022 with GDP growing at 5.1 percent as the deployment of vaccines intensifies and implementation of the National Development Strategy 1 (2021-2025) bears fruits, the major worry is that on the overall, the Covid-19 global contagion continues to pose significant downside risks.

Many countries have reverted back to the disruptive lockdown mode amid rising third wave fears and more fatalities.

In view of this reality, the World Bank has said global and local outlook remains uncertain.

What this actually means is that a prolonged pandemic would result in weaker global demand, and heightened macro-economic instability, which could choke economic growth, increase poverty, and worsen human capital development outcomes.

Mitigating these risks, said the World Bank, requires supportive domestic policies that will strengthen and sustain macro-economic stability, which is critical for consolidating economic recovery.

The bank has also noted how recent efforts to stabilize prices through rule-based monetary and exchange rate policies have been effective and recommends that these must be continued and expanded.

Fiscal policies supportive of these efforts, it said, have thus focused on avoiding monetary financing and quasi-fiscal activities, reducing distortive subsidies, and improving fiscal and debt transparency.

“Improving the country’s growth prospects will require further attention to policies that strengthen the quality of service delivery in the social sectors,” World Bank Zimbabwe country manager, Mukami Kariuki, said.

“Preserving lives during an unprecedented time that protects livelihoods, strengthens social protection, improves food security, and ensures better education outcomes.”

Looking into the future, Zimbabwe continues to face tight public finances and limited recourse to external financing.

The country will, thus, need to rely mostly on reallocating domestic resources to optimal public uses and leveraging private financing and humanitarian support where possible.

Now faced with the Covid-19 yoke, the World Bank says addressing underlying challenges in health, education, social protection, and food security will require sustained financing, strengthened accountability frameworks and investments in appropriate management information systems.

The ZEU report reviews developments in 2019 and 2020 and emerging trends in 2021. While part one of the ZEU report provides an overview of the macro-economic and poverty context, part two assesses the impact of Covid-19, and other exogenous shocks on delivery of basic services to the poor and proposes mitigating actions for discussion.

It also summarizes key policy options needed to stabilize Zimbabwe’s economy, minimize the social costs of the transition, and prepare for an economic recovery.

Tanya Nyathi is medical editor for FCB Health, a top Pharma Agency in New York. She holds an M.Phil in Communication Management from University of Pretoria in South Africa and an M.Sc in Journalism at Columbia University in New York. For seven years, she has been a regular health and science contributor to African news publications with a global audience. 

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