Zimbabwe first implemented structural reforms in the early 1990s in a bid to access resources from the IMF and World Bank.
Due to slow growth at the time, the government took measures to reduce public expenditure, deregulated financial and labour markets as well as liberalizing key industries such as agriculture and manufacturing. The Government of Zimbabwe had intended to slash the budget deficit by at least 5 percent of the GDP and boost the economy. Unfortunately, the southern African country experienced severe droughts which affected agricultural output causing exports to decline.
Over the years, the country has encountered economic hardship mostly caused by inconsistent policies and the land reforms which interfered with commercial farming.
By 2003, Zimbabwe’s inflation rate had been recorded at around 585.84% and surged rapidly thereafter. Interestingly, the government responded to the economic shocks by printing more money. This however decimated the economy even further as it caused hyper-inflation in 2008. In which, the government was left with no choice but to abandon the local currency and opt for full dollarisation.
Early this year, the new government embarked on the IMF’s Staff-Monitored Programme (SMP) in an attempt to restore the economy. The SMP intends to set sound economic and social policies to foster macroeconomic stability. Some of the structural reforms under the SMP include improving the business environment, fiscal adjustments, privatising public enterprises and safeguarding vulnerable societal groups. Gene Leon, who led the IMF mission to Harare said in a statement,
“Zimbabwe is facing deep macroeconomic imbalances, with large fiscal deficits and significant distortions in foreign exchange and other markets, which severely hamper the functioning of the economy.In addition, Zimbabwe is facing the challenge of responding to the adverse effects on agriculture and food security of the el Nino-related drought, as well as the devastation from Cyclone Idai.”
The SMP is expected to run until March 2020, although the government has stepped up its efforts to reform and even introduced a new currency. One wonders whether these reforms will positively impact the economy in terms of employment and food security.