Ray of hope for economy

The appointment of key new cabinet ministers by President Robert Mugabe indicates that the Zimbabwean government may embark on a programme of economic reform, but much depends on their room for manoeuvre over policy the London-based Economist Intelligence Unit said in its latest report.

“With the appointment of a number of technocrats to key posts in the cabinet, including Simba Makoni as minister for finance and economic development, there is some hope that there may soon be progress on economic reform,” the EIU said. “The new finance minister has good credentials as an economist but it is not clear whether he has sufficient political weight within the cabinet to push ahead quickly with economic reform, a problem that has undermined the positions of several capable finance ministers in the past.”

According to the EIU, “quick action is crucial” and a first step is a “long overdue” devaluation of the currency. But the government may not open negotiations with donors for external support “until nearer the end of 2000, or even in early 2001, when it may have to reverse some of its more nationalistic policies”.

The intelligence unit said real GDP growth for 2000 is forecast to fall by 6 percent while inflation is above 60 percent and could rise in coming months. The budget deficit is also set to widen. The government has fixed the exchange rate at an “unsustainable” 38 Zimbabwe dollars to US $1 since January 1999, causing “serious distortions to the economy”. The EIU forecasts the Zimbabwe dollar will end the year at 58 to US $1.