Zim agriculture production to decline

HARARE - Zimbabwe's agricultural production is expected to significantly decline in the next two years due to changing weather patterns and lack of strong economic policies.

In its 2017 Zimbabwe Economic Update released yesterday, the World Bank (WB) said the country’s economic growth will also taper down to 0,9 percent in 2018 — from this year’s 2,7 percent — before plummeting further to 0,2 percent in 2019 due to low agriculture production.

The Bretton Woods institution senior economist, Johannes Herderschee, said while favourable rains and a revitalised agricultural sector were expected to underpin economic growth this year, the gains could be short-lived in the wake of incomplete fiscal-adjustment policies and structural reforms.

“… We are not overly optimistic about 2018 and 2019. The reason is that growth is being driven by agriculture and you can’t say the same growth recorded with the rains will be the same in the coming years . . . ,” she said while presenting part of the report in the capital yesterday.

“Sustaining robust long-term growth will require addressing underlying fiscal and financial sector imbalance . . .

“So, we estimate growth will be 0,9 and 0,2 respectively . . . And there is also the possibility that a rising money supply will boost inflation, and this is likely to dampen Zimbabwe’s medium-term growth outlook,” the senior WB economist added.

This comes as the country’s agricultural sector, which used to be the backbone of the economy but was heavily decimated by President Robert Mugabe’s chaotic and often violent land reforms — rebounded this year from a devastating drought last year.

Taking advantage of the good rainy season, the government launched the command agriculture programme, under which the country is targeting to produce

two million tonnes of maize on 400 000 hectares of land.

Meanwhile, the Bretton Woods institution also noted that government’s excessive spending resulted in the country’s fiscal deficit widening to 10 percent from 2,3 percent last year.

“… As a result of this, Treasury kept going back to the market and central bank with an overdraft facility to finance this deficit and cash shortages then followed, financing for imports dried up, and the current account deficit narrowed dramatically,” Herderschee said.

The bank projects that inflation would close the year at 3,2 percent — much to the horror of local citizens who are already bracing for a hike in prices of basic goods prices.

The WB further anticipates inflation to accelerate and close 2018 at 9,6 percent.

The bank also noted that Zimbabwe’s total debt stock would continue to grow, with the country being weighed down by public spending, which amounted to about 50 percent of gross domestic product (GDP) last year.

The country, which settled $108 million in arrears to the International Monetary Funds’ Poverty Reduction and Growth Trust last year and still has an over $7 billion debt overhang, could be left with better access to international capital if it managed to clear external arrears.

“… But only notably so if sound fiscal management and structural reforms successfully restore fiscal and external sustainability…

“However, resorting to non-concessional lending to clear arrears in a context of tight liquidity conditions and depleted international reserves could add pressures to an already tight budgetary situation if not accompanied by fiscal, monetary and investment reforms . . . ,” the bank said.

Responding to this, Finance minister Patrick Chinamasa said while the re-engagement process had been “somewhat slow” the country was on track with clearing its arrears.

“We remain committed to the re-engagement exercise (with foreign lenders) but the process has remained painfully slow. As government we remain committed to re-engage the World Bank, the International Monetary Fund and African Development Bank,” the Treasury chief said.

According to the WB, Zimbabwe’s biting liquidity crisis – which has left local bans disbursing sackfuls of coins in the past year as hard cash continues to run out — had contributed to a narrowing of the current account deficit.

“While a decline in imports has narrowed the current-account deficit, Zimbabwe’s external position remains precarious. A combination of tight credit conditions, the inability of Zimbabwean banks to honour international payments, and import restrictions caused imports to contract by about 14 percent.

“Meanwhile, exports increased by about 2,4 percent, and the current-account deficit contracted by six percentage points to 4,1 percent of GDP in 2016,” the report said, adding policies favouring exporters had facilitated for a current account adjustment.

Overall, the bank said the country’s long-term growth prospects were positive.

“Zimbabwe’s long-term growth prospects are positive, but to restore fiscal and debt sustainability the government must adopt policies that reduce the country-risk premium in international capital markets.

“Despite the turbulence of recent years, Zimbabwe’s economic fundamentals remain strong: the country has considerable human capital and a wealth of natural resources, and it continues to spend more on education as a percentage of GDP than any other country in Sub-Saharan Africa.

“A reduction in the country-risk premium would improve the government’s access to affordable capital, enabling it to complete much-needed infrastructure investments and revive its major industries,” the WB.

Comments (4)

There is absolutely no reason why Zimbabwe cant regain Bread-Bascket-of-Southern -Africa status. The Command Agriculture to succeed, emphasis should be placed on widespread irrigation schemes, that rely on water from dams, boreholes etc ( and less reliant on weather patterns) as well as further investments in green houses and infrastracture. The Zanu(PF) stalwarts want this to succeed, so are raising the necessary resources towards the Command Agriculture.So, hopefully they will keep an eye on possible looting loopholes. Directed towards one nation notion and not implemented along political, tribal and regional lines.

Maxwe Maenzanise - 23 June 2017

In addition to the above,if Zanu-PF is to lose, as predicted, in next year's elections, they would at least leave a legacy, which they might use to their advantage in future elctions...Only way forward

Maxwell Maenzanise - 23 June 2017

Of course, if ZANU hadn't spent the last 36 years smashing up the commercial farming sector and replacing it with nothing significant, there wouldn't be any need for "command" anything. WB simply says the obvious. Time for Zimbabwe to get itself a decent government, not a regime that indulges continually in strategic terrorism.

spiralx - 14 July 2017

with the changing political scene and enthusiasm among people,Zimbabwe may achieve higher growth in agriculture in 2018 /09 onward.

Dr.HB Singh - 2 June 2018

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