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Zimbabwe Zimbabwe at a Glance: 2003-04 Country Report December 2002 Zimbabwe Zimbabwe at a glance: 2003-04 OVERVIEW The Economist Intelligence Unit expects the president, Robert Mugabe, and his Zimbabwe African National Union-Patriotic Front (Zanu-PF) to remain in power for the next two years and possibly for several years after that. Supported by the security forces and party militias, the president will maintain the current high level of political repression against any form of opposition to his regime. The government is also likely to continue with its current economic policies—which have driven a massive economic decline in Zimbabwe since 1999—for as long as possible. Instead of addressing the fundamental problems causing the economic decline, such as the huge fiscal deficit and the loss of confidence in the government, economic problems will be addressed on an individual basis as they arise. As a result, we expect real GDP to decline by 12.1% in 2002, 8.8% in 2003 and 4.7% in 2004. As fiscal policy will continue to be loose, inflation is expected to rise from an average of 131.6% in 2002 to 281.7% in 2003, although it should moderate somewhat to 176.8% in 2004. Key changes from last month Political outlook • Reported incidents of food aid being used for political ends by the government have increased sharply. The US may now take the lead in providing food aid outside of government channels. Economic policy outlook • The government’s budget for 2003 outlines a policy of agrarian-led economic recovery. However, owing to disorganisation, poor rains and the government’s land reform programme, this is unlikely to materialise. • The Reserve Bank of Zimbabwe has announced that it will close foreign- exchange bureaux by the end of November and clamp down on the parallel foreign-exchange market. It has also introduced a dual interest rate policy. • Price controls have been widened to cover a much broader range of goods. Economic forecast • The parallel exchange rate had fallen sharply to around Z$2,000:US$1 by late November 2002. We are now forecasting that it will fall to Z$4,000- 5,000:US$1 by the end of 2003. December 2002 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2002 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 1350-7095 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2003-04 7 Political outlook 9 Economic policy outlook 10 Economic forecast 14 The political scene 23 Economic policy 28 The domestic economy 28 Economic trends 30 Agriculture 31 Mining and industry 32 Finance and other services 33 Foreign trade and payments List of tables 11 International assumptions summary 13 Forecast summary 25 Allocation of foreign exchange to non-exporters and individuals 27 Revenue projections 28 Government expenditure 29 Inflation data, 2002 31 Zimbabwean mineral production 34 External debt service List of figures 13 Gross domestic product 13 Regional real exchange rates 18 Confirmed contributions to Zimbabwe’s food aid programme 26 Treasury-bills held by the Reserve Bank of Zimbabwe 28 Gross domestic product 33 Zimbabwe Stock Exchange industrial index Country Report December 2002 www.eiu.com © The Economist Intelligence Unit Limited 2002 Zimbabwe 3 Summary December 2002 Outlook for 2003-04 The Economist Intelligence Unit expects the president, Robert Mugabe, and his Zimbabwe African National Union-Patriotic Front (Zanu-PF) to remain in power for the next two years and possibly for several years after that. Supported by the security forces and party militias, the president will maintain the current high level of political repression against any form of opposition to his regime. The government is also likely to continue with its current economic policies, which have caused a massive economic decline in Zimbabwe since 1999, for as long as possible. Instead of addressing the fundamental factors causing the economic decline, such as the huge fiscal deficit and the loss of confidence in the government, economic policy will address individual problems as they arise. As a result, we expect real GDP to decline by 12.1% in 2002, 8.8% in 2003 and 4.7% in 2004. As fiscal policy will continue to be loose, inflation is expected to rise from an average of 131.6% in 2002 to 281.7% in 2003, although it should moderate somewhat to 176.8% in 2004. The political scene There is increasing evidence that the government is using food aid as a political weapon to starve its opponents and reward its supporters. The World Food Programme suspended food aid deliveries during the Insiza by-election. US officials have threatened “intrusive and interventionist” measures to deliver food aid directly to millions of starving Zimbabweans. This would increase tension between the government and donors of food aid. The US has become increasingly concerned about the increasing lawlessness in Zimbabwe. The trial for treason of the opposition leader, Morgan Tsvangirai, has been postponed until February 3rd 2003. Zanu-PF is due to hold its annual congress in the town of Kadoma in mid-December. Economic policy The new finance minister, Herbert Murerwa, has outlined a policy which aims to promote an agrarian revolution, although owing to disorganisation and the likelihood of poor rains in 2003 the maize crop is unlikely to recover significantly. The government has altered the regulations regarding foreign- currency accounts, as it wants to capture as much foreign exchange as possible. Price controls have been widened to cover a comprehensive range of goods. The Reserve Bank of Zimbabwe has introduced a dual interest rate policy whereby interest rates for consumer borrowing and mortgages will be market determined. The domestic economy Projections by the Ministry of Finance indicate that real GDP will contract by 11.9% in 2002 and 7.2% in 2003. The Zimbabwe dollar has fallen sharply on the parallel market in recent months. Gold production has continued to decline, although the fall may have started to bottom out. Platinum production has expanded rapidly in 2002 owing to increased output by Zimplats. Foreign trade and payments There have been rumours that the fuel deal with Libya has collapsed because of delays in payments by the government. External debt arrears have continued to mount in 2002 and are expected to reach US$1.4bn by the end of 2002. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: December 1st 2002 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report December 2002 www.eiu.com © The Economist Intelligence Unit Limited 2002 4 Zimbabwe Political structure Official name Republic of Zimbabwe Form of state Unitary republic Legal system Based on Roman-Dutch law and the 1979 constitution National legislature House of Assembly with 150 members, 120 of whom represent geographical constituencies and are elected by universal adult suffrage every five years; 8 are provincial governors, 10 are customary chiefs and 12 others are appointed by the president National elections June 2000 (legislative) and March 2002 (presidential); the next elections are due in June 2005 (legislative) and March 2008 (presidential). Head of state President, elected by universal suffrage for a six-year term National government The president and his appointed cabinet; last major reshuffle July 2000 Main political parties Zimbabwe African National Union-Patriotic Front (ZANU-PF), the ruling party since 1980, governed by a 138-member Central Committee and a 24-member Political Bureau (Politburo), holds 62 seats in parliament. The Movement for Democratic Change (MDC), formed by the trade union movement in September 1999, emerged as the main opposition party following the June 2000 election and has 57 seats.
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