Economists warn on austerity measures

via Economists warn on austerity measures – DailyNews Live by Kudzai Chawafambira 18 SEPTEMBER 2013

Zimbabwe must implement austerity measures that assist in strengthening the economy, says John Robertson a leading economist.

Robertson told delegates attending a “New Government, New Policies, New Expectations” summit held in Harare yesterday that there was need to present a brand new set of promises to the people.

“If we all want Zimbabwe to make a rapid recovery and we all want to see rising levels of prosperity benefitting the whole population, we need to present a brand new set of promises to the people of Zimbabwe and to the investors we desperately need,” he said.

The southern African nation’s economy — relatively stabilised and registered growth following the formation of a coalition government in 2009 that led to the adoption of a multi-currency system — but is now showing signs of being burnt out.

Government recently slashed this year’s economic growth forecast from a projected five percent to 3,4 percent due to drought and low aggregate demand.

Market observers attributed the slowdown in the economy to the indigenisation law which compels foreign-owned companies to cede 51 percent shareholding to locals.

Critics say the controversial Act has spooked willing investors and presented fresh threats to efforts of attracting more capital and foreign direct investment (FDI).

Robertson said the current administration must deliver sound economic policies that can help stimulate investor confidence.

“We should promise everyone involved in business activities that the same set of rules applies to everyone, and that no exceptions will be made in exchange for favours or little brown envelopes,” he said.

Robertson asserts that the new government must also economically empower citizens through respect for civil and property rights.

“As a country we should promise to rebuild the institutional support structures that are needed to give fixed assets, like land, the secure market value they need and the enormous leverage they can have as security for bank loans,” he said.

Bulawayo-based economist Eric Bloch recently said President Robert Mugabe’s policies should be modified so that they do not scare away much-needed direct foreign investments.

Bloch said the new government will need to modify the “Indigenisation and Economic Empowerment” laws so that they did not simply enrich a few, but rather served the interests of the entire population.

“They will also need to revise the country’s tax laws to make them consistent with other countries in the region to avoid another barrier in terms of investment,” he added.