ALTHOUGH the government of Zimbabwe has revised it GDP growth forecast by 1.5 percentage points from 3.8% to 5.3% in 2023, a social justice watchdog, the Zimbabwe Coalition on Debt and Development (Zimcodd), says attaining the target may be hampered by the effects of a disputed election.
Zanu PF won the disputed August general election which was rejected by key observer missions, including the Southern Africa Development Community (Sadc), over gross irregularities that include failure to comply with local and regional laws on democratic elections.
According to an economic review by Zimcodd, the projected growth rate is likely to be affected by continued impunity, rampant corruption and rising economic dollarisation which breeds informality and tax evasion, among other factors.
“These post-election risks include, among others, deep societal polarisation, politically motivated violence and conflict, disruptive partisanship, elevated white-collar corruption in government, poor service delivery, plunder of natural resources, and capital flight.
“There are also revenue risks posed by reduced tax compliance, rampant corruption and impunity, and rising economic dollarisation which breeds informality and tax evasion. More so, there are lingering post-electoral risks being posed by the August 2023 disputed election results,” reads the review.
“In the end, these may exert a negative bearing on international relations and cooperation, foreign direct investment (FDI), official development assistance (ODA), and the ongoing Adessina-Chissano-headed high-level structured dialogues with creditors.”
Zimbabwe’s debt talks are already hanging by a thread following the shambolic general election. Ahead of the elections, the United States said Zimbabwe’s ongoing dialogue with multilateral and bilateral creditors, which is currently being facilitated by African Development Bank (AfDB) president Akinwumi Adesina and former Mozambican president Joaquim Chissano, provided a window of opportunity to help normalise relations between Washington and Harare.
During the pre-election period, the European Union delegation, in reaction to Mnangagwa’s assenting to the Patriotic Bill, also indicated that Harare’s move is regressive in Zimbabwe’s bid to clear its image.
“Zimbabwe as a sovereign country has committed in the Arrears Clearance process to enhancing respect for freedoms of association, assembly and expression, as well as building trust with the international community. Today’s legislation (Patriotic Act) sends a political signal in the opposite direction,” said the EU via its official X social media handle.
Zimcodd said the bulging domestic debt and failure to invest in renewable energy are also likely to slow economic growth.
“The debt owed to regional foreign electricity suppliers is rising, which may end up affecting Zimbabwe’s capacity to import electricity to augment output produced locally. Even though electricity production has improved so far in the second half of 2023 (2HY23), hydro output from Kariba Dam is facing serious threats from dwindling dam water levels. Also, there are limited investments in the energy sector from the private sector and frequent breakdowns of aged Hwange thermal plants (Units 1-6) are increasing thermal production costs, thereby constraining thermal output,” reads the review.
“If this holds, minimal power rationing schedules being currently experienced across the nation will likely worsen and cripple economic activity. More so, there is a high likelihood of expenditure risks emanating from elevated interest rates, structural budget rigidity, and limited fiscal space.”
The social justice watchdog said growth perceptions are also becoming bleak, with the latest projections of El Niño showing that weather conditions for the upcoming 2023/24 summer cropping season could spell disaster — crop failure, high food prices, and increased food insecurity.
Zimcodd said these are likely to raise chances of above-average fiscal spending in the second half of 2023 and beyond as the government will be compelled to cushion the economy and citizens from likely drought conditions.
While elevated fiscal spending increases Zimdollar liquidity thus threatening the stability of the Zimdollar and Zimdollar market prices, Zimcodd said the mitigation of 2024 budget risks will require political dispute resolution, strengthening of existing legal and regulatory frameworks and capacitation of all oversight and accountability institutions to curb leakages.
“Mitigation will require increased domestic resource mobilisation (DRM), diversification of the economy (value addition and beneficiation), provision of quality, affordable and accessible public services, strengthening of social safety nets, engagement and re-engagement with the global community, and implementation of robust reforms to strengthen democracy, improve government efficiency, and subdue pricing distortions prevailing in the market,” said Zimcodd in the review.