New govt comes under a load of huge expectations 

Source: New govt comes under a load of huge expectations – The Zimbabwe Independent November 24, 2017

INCOMING President Emmerson Mnangagwa’s new government faces a herculean task in stemming the tide of economic implosion and a growing socio-political crisis that have engulfed Zimbabwe with renewed intensity in recent months.

Bernard Mpofu/ Owen Gagare

Mnangagwa, who will be sworn in today replacing his mentor-turned-tormentor Robert Mugabe, requires a raft of reforms to rescue the country from the economic doldrums and isolation.

His immediate task will include finding solutions to the ongoing cash shortages and liquidity crunch affecting business and the people.

He also has a task of putting in place policies to address foreign currency shortages through measures like promoting foreign direct investment and exports.

Foreign curreny shortages are crippling economic activity and transactions.

Mnangagwa will also have to find a solution to the currency problems bedevilling the economy by deciding whether to use the rand as the main unit instead of the United States dollar, among other decisions.

The southern African nation has not had its own currency since 2009 when government ditched the local unit for a basket of international currencies mainly dominated by the United States dollar.

Mnangagwa also needs to make it clear that he is ready to do business with the international community, including Western countries.

Government’s excessive spending and the over-reliance on Treasury Bills on the back of an export collapse have over the years worsened the liquidity situation. In November last year, the Reserve Bank introduced a US$200 million export incentive facility through bond notes but the interventionist measure has, in turn, resulted in the scarcity of the greenback.

According to NKC African Economics, an Oxford Economics company, inclusivity in government will be the key determinant of Mnangagwa’s success or failure.

“Zimbabwe may have rid itself of Mugabe, but it still has a Zanu PF that has previously not hesitated to do Mugabe’s will — including stealing elections, stealing from the Treasury and turning repression into an art form. We need to be convinced that this new Zanu PF is not just a ‘weekend special’ and that old habits will not set in again — particularly for those with cosy little patronage networks that should now come under the spotlight,” NKC African Economics said in a research note.

“We particularly need to be convinced that Mnangagwa — Mugabe’s henchman for decades — is the man to lead this reconstruction and reconciliation. It would be encouraging to see Mnangagwa reach out to those opposition parties and groupings who pledged to help Zanu PF rid itself of Mugabe and include them in a national unity movement with the sole focus on rebuilding the country.

“The task facing Mnangagwa, Zanu PF, the Movement for Democratic Change (MDC) factions, Joice Mujuru and several others is to put aside party-political issues and begin to implement economic and social policies that will encourage the wider international community to take Zimbabwe seriously and send the resources it needs to rebuild.”

With public sector spending accounting for more than 90% of government revenue, while domestic and external debt continue to soar, analysts say Mnangagwa should re-engage multilateral lenders for debt forgiveness or rather pursue the abandoned Lima Plan.

In September, the Zimbabwe Independent reported that the country’s debt and arrears clearance plan, which was first adopted in Lima, Peru, two years ago, was facing serious headwinds.

This came soon after Reserve Bank of Zimbabwe (RBZ) governor John Mangudya had announced that the debt-ridden country had secured funding to settle World Bank arrears, but that was too early an announcement to pop the champagne bottle.

Despite announcing that the country had secured funding to clear the US$1,4 billion arrears to the World Bank and US$600 million owed to the AfDB, the central bank chief said more has to be done to ensure that the country meets the pre-requisites of settling the arrears.

Before successfully clearing its arrears to the International Monetary Fund (IMF) recently, Zimbabwe owed three international financial institutions (IFIs), who enjoy preferred creditor status, US$1,8 billion.

Mangudya told the Independent that while government was still committed to the Lima Plan, many obstacles have to be overcome before creditors can accept money from Zimbabwe.

“Funding has been arranged and that payment would be done in synchrony with the implementation of the structural economic reforms that include enhancing investor trust and confidence, state-owned enterprises transformation, ease and cost of doing business and fiscal consolidation. This situation hasn’t changed,” Mangudya then said.

Two years after the Lima Plan was adopted, outgoing president Mugabe’s intransigence stalled the arrears clearance programme.

The United States government this week urged the new government to respect the rule of law and democratic practices.

“Whatever short-term arrangements the government may establish, the path forward must lead to free, fair and inclusive elections, in which the people of Zimbabwe are free to assemble peacefully without undue interference,” the embassy said as the country prepares for next year’s harmonised elections.

Mnangagwa will need to ensure the country’s laws are quickly aligned to the new constitution and that human and property rights are respected.

He also needs to implement electoral and media reforms.

Apart from economic reforms, Mnangagwa has to deal with political, electoral and media reforms, among other important things which his government would be measured by.