Moving forward in Zimbabwe - Brooks World Poverty Institute - The ...

Moving forward in Zimbabwe
Reducing poverty and promoting growth
before ESAP. Similarly, average inflation rose from 15 per cent to 25
per cent, while interest rates trebled (Moore, 2003). Implementing
ESAP reforms required US$3.5 billion in new foreign loans over
five years, which added to the existing debt of US$2.5billion.
Even worse, during the 1992/93 fiscal year, interest payments on
both foreign and domestic debt increased 15 per cent more than
projected due to interest and exchange rate volatility (World Bank,
1995). Table 1.3 shows the deteriorating macroeconomic indicators
during the reforms.
Under ESAP, Zimbabwe also suffered what has been
described as ‘deindustrialisation’. This was evident in several
key manufacturing sectors, such as textiles, which saw a 61 per
cent contraction between 1990 and 1995 (Carmody, 1998) and
manufacturing output in general fell more than 20 percent between
1991 and 2000 (Ismi, 2004). Reduction in social spending by the
state also affected basic social services and a parallel programme
of reforming the civil service saw 25 per cent of public workers
laid off. Unemployment reached 50 per cent by 1997. In spite
of a programme to mitigate the social effects of adjustment the
percentage of people living below the poverty line rose from 50
per cent to 75 per cent. These social costs created a public backlash
culminating in what the media termed ‘IMF Riots’, the most severe
of which were the 1994/5 bread riots in the capital city, Harare.
Public workers went on strike in 1996, followed by numerous other
trade union organised strikes in 1997. The public unrest and a heavy
handed response to growing discontent fermented resentment,
mostly among the urban dwellers hardest hit by the impact of the
reforms. Among other political factors this resentment led unions
and other actors to form the Movement for Democratic Change
on an agenda to protect the rights of individuals seen as being
undermined by state actions. It was partly the resulting struggle for
hegemony between the newly formed opposition and the ruling
party that led to a new political dimension to the crisis. In some
ways, it can be said that although ESAP had some successes, its
failure to drive GDP growth during the 1990s could have laid the
foundations for the unstable economic environment that, coupled
with a crisis in political governance, led to the rapid economic
decline that is evident in the GDP growth trends from the year
2000 onward. However, there is a need to balance this point with
the unknown trajectory of the economy had ESAP not been
implemented.
Economic management and ‘Black Friday’
On the 14 th of November 1997 (now called Black Friday) the
Zimbabwe dollar lost 71.5 per cent of its value against the US dollar
and the stock market crashed, wiping off 46 per cent from the value of
shares as external investors lost confidence in the currency. Debates
are inconclusive on the real causes of Black Friday but contributory
factors include economic management decisions (Gopinant, 1998),
the failure of the IMF’s structural adjustment programmes and
the attendant decline in investor confidence (Mambondiyani,
2006). Two major economic management decisions by the state
are often singled out as triggering ‘Black Friday’, both involving
unbudgeted expenditure. These were: payments made to veterans
of the war of liberation struggle; and the country’s involvement in
the civil war in the Democratic Republic of Congo (DRC) (Moore,
2003; Gopinant, 1998). It is thought that these ad hoc economic
management decisions outside of the normal budget process played
a major role in the loss of investor confidence, which deepened an
emerging economic recession.
Land reform and its impact on the economy
In November 2008, up to 80 per cent of the population survived on less than US$2 per day. The country had
become a world leader in creating poverty (Photo © Tsvangirayi Mukwazhi).
17