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Zimbabwe’s economy showing growth after longtime fiscal chaos
Question of the Day
Zimbabwe's economy is set to grow three times faster than the U.S. economy this year, according to new official projections released last week, in a striking turnaround for the southern African country that three years ago posted a 500 billion percent inflation rate and was considered an economic basket case.
Finance Minister Tendai Biti said in his midyear budget briefing to Zimbabwe's parliament in Harare that the economy will grow by 9.3 percent this year, a rate that will make it one of the fastest-growing economies on the continent, with the highest growth rate of any country in southern Africa.
The projected 2011 figures, following a 4.1 percent increase in 2010, is a stunning turnabout from the first decade of the new century, when the GDP shrank virtually every year, the currency collapsed and key social measures such as infant mortality and life expectancy deteriorated greatly. It also comes despite political uncertainty as longtime Zimbabwean leader Robert Mugabe oversees a shaky coalition government that includes longtime political opponents.
Economists say Zimbabwe's striking growth can be attributed primarily to strong recoveries in its mining and agricultural sectors, but uncertainty remains because of concerns about the country's financial structure and capacity.
"While we are on course to meet our revenue targets, it is fair to say that a number of structural challenges remain arresting our economy," Mr. Biti said, pointing to the government's inability to live within its means as the "epicenter" of the challenge.
International Monetary Fund spokeswoman Gita Bhatt said the IMF's estimate of Zimbabwe's economic growth is significantly lower than the country's government statistics.
"Zimbabwe's economy is now operating far below its potential capacity," Ms. Bhatt said in email to The Washington Times. "Estimates of economic growth, therefore, to a large degree depend on how fast the capacity gap can be closed rather than an estimate of how fast the capacity can be expanded."
Zimbabwe's economy has suffered catastrophic setbacks during the 28-year rule of Mr. Mugabe, including hyperinflation and an estimated 95 percent unemployment rate at the depth of its depression in the mid-2000s.
A gradual economic recovery began as Mr. Mugabe was forced into a power-sharing agreement with Prime Minister Morgan Tsvangirai in 2009. The country's shift to the South African rand and the U.S. dollar brought inflation down to its current 2.7 percent level.
Mr. Biti, a member of Mr. Tsvangirai's Movement for Democratic Change, acknowledged that political uncertainties about the power-sharing arrangement still hold back the economy.
"Political issues are imposing serious shocks and pressures on our economy," he told lawmakers.
The United States and leading Western nations have long clashed with the Mugabe government, imposing a series of sanctions targeting Mr. Mugabe and some 250 top government officials and regime-allied businesses as the Harare government cracked down violently on political opposition in recent years.
But Charles Ray, U.S. ambassador to Zimbabwe, said in a lengthy address at a conference in Harare last week that the Obama administration now supports Zimbabwe's economic growth, despite its "dysfunctional friendship."
"The U.S. is actively promoting Zimbabwe's economic recovery," Mr. Ray said, pointing to U.S.-led loan guarantee and investment programs in the country. "We are eager to work closely with the business community and Zimbabwean government across the political spectrum to find new and collaborative ways to build on these efforts for the mutual benefit of our two countries," he said.
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By Andrew P. Napolitano
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