Medium Term Plan – 2011 to
2015: an economist’s view
Presentation by Panashe Chitumba
THE 2011 IAC CONFERENCE
NYANGA TROUTBECK RESORT
8 SEP’ 2011
-Internal factors
External Factors
ZIMBABWE SITUATIONAL
ANALYSIS – AS WE
EMERGE FROM
HYPERINFLATION CRISIS
Positive Factors
Negative Factors
STRENGTHS
WEAKNESSES
-Natural resources
endowments
-High literacy levels
(90%)
-Peace loving
-Disharmony in policy
e.g. economic
empowerment
-Low productive capacity
utilization and low GDP
-Infrastructural decay
- poverty
OPPORTUNITIES
THREATS
-Firming international
commodity prices
-Increased investment
flows into Africa
-Accessibility of global
financial markets &
capital
-New emerging market
segments (BRICS)
-Global economic
recession
-International negative
publicity
-Competition from other
stronger economies
(cheaper imports),
- Global Warming and
climatic changes.
PURPOSE OF NATIONAL
STRATEGIC PLANNING
•Laying the direction for
economy to take
•Spelling out the national
priorities
•Setting national goals for
development
•Fostering unity of purpose
in economic development
•Guiding investment and
development partners
National
Vision
building
Medium Term
Planning;
STERP II
Fiscal &
Monetary
Policies;
STERP
Corporate &
Individual
Plans &
Budgets
IMMEDIATE
SELECTED ISSUES
REQUIRING ATTENTION
DURING 2011 TO 2015
SETTING THE RIGHT NATIONAL GOALS
IN LINE WITH OUR CAPACITY TO WORK
TOWARDS THEIR ACHIEVEMENT.
• capital raising initiatives
• external debt restructuring
• macro economic stability
• policy certainty
• business confidence
• capacity utilisation poverty
reduction
• social services affordability
& accessibility
• economic empowerment
•Reduced donor dependency
• infrastructure development
• sustaining the
development momentum
LONG TERM
MEDIUM TERM PLAN
GOALS : DURING 20112015
• TRANSFORM THE
ECONOMY
• REDUCE POVERTY
• CREATE JOBS
• MAINTAIN
MACROECONOMIC
STABILITY
• RESTORE PRODUCTIVE
CAPACITY
• BUILD UPON THE GAINS
FROM STERP
•
OUTLINING THE NATIONAL •
•
PRIORITIES
THESE HAVE ALSO BEEN SPELT OUT
•
IN:
- STERP II
- MTP
- NATIONAL BUDGET STATEMENTS
- MONETARY STATEMENTS
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•
•
•
•
•
INFRASTRUCTURE DEVELOPMENT
EMPLOYMENT CREATION
HUMAN CENTRED DEVELOPMENT
ENTREPRENUERSHIP
DEVELOPMENT
MACROECONOMIC STABILITY
ICT AND SCIENCE & TECHNOLOGY
DEVELOPMENT
GOOD GOVERNANCE
INVESTMENT REGULATION,
COORDINATION AND PROMOTION
RESOURCE UTILISATION AND
POVERTY REDUCTION
GENDER MAINSTREAMING INTO
ECONOMIC ACTIVITIES
IMPLENTATION
TARGETS
All systems
complementary
•
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Average annual GDP growth rate of 7.1%;
Single-digit annual inflation;
Interest rates that promotes savings and investment;
Current Account Deficit of ≤ 5 percent of GDP by
2015;
Average annual jobs creation rate of 6 %;
Sustained Poverty Reduction in line with MDGs
targets;
Foreign Exchange Reserves of at least 3 months
import cover by 2015;
Double-digit savings and investment ratios of
around 20 percent of GDP by 2015;
Budget deficit of less than 5 percent of GDP by
2015;
Reduce sovereign debt to at least 60 percent of GDP
by 2015.
SHORTCOMINGS OF PAST BLUE
PRINTS? WHAT ARE WE DOING
DIFFERENTLY THIS TIME
AROUND?
• ZIMBABWE HAS BEEN REOWNED FOR
DRAWING UP GOOD PLANS/POLICIES
THAT FAIL AT IMPLEMENTATION
STAGE DUE TO, INTER-ALIA:
– INADEQUATE FUNDING & UNREALISTIC
FINANCING SOURCES
– RESPONSIBILITY & ACCOUNTABILITY
CHALLENGES – CHECKS & BALANCES
– UNREALISTIC TARGETS (NOT ALIGNED TO
POLICIES e.g. targeting single digit
inflation when creating credit in excess of
economy’s capacity),
– LACK OF TECHNICAL CAPACITY,
– POLICY INCOHERENCE,
– WEAK MONITORING AND EVALUATION
PROCESSES
FUNDING THE MEDIUM
TERM PLAN
OUR GDP APPROX.
US$ 9 BN? WE “EAT” > 90%
OF IT (LEAVING LITTLE TO
INVEST) . SHOULDN’T WE
EXPLORE MORE FUNDING
OPTIONS?
• APPROX USD 9.2 BILLION IS
REQUIRED TO FUND THE
INVESTMENTS UNDER THE MTP
• SOURCE – LARGELY DOMESTIC
• WHAT IS THE CAPACITY OF THE
DOMESTIC MARKET?
• WHAT OTHER OPTIONS DO WE
NEED TO PURSUE? FDI
• WE ARE NOW A PLAYER IN A
GLOBAL VILLAGE.
• WHAT SHOULD WE DO IN ORDER
TO ATTRACT FUNDING FROM THE
GLOBAL CAPITAL MARKETS?
• DEBT STRATEGY KEY TO
ATTRACTING INTERNATIONAL
CAPITAL
RELEVANT LESSONS?
SAVINGS MOBILISATION:
• Economic growth is easily sustained
in countries with high savings rates.
For example China (with savings of
54% of GDP), India (35%), Russia
(23%), South Africa & Brazil ( 15%)
have recorded phenomenon growth
due to high savings rates. Countries
with low saving rates such as USA
(10% of GDP) are struggling to
sustain growth (Standard & Poors 2009).
• Zimbabwe’s savings rate was
estimated at -4% in 2009 (Ministry
of Finance).
INFRASTRUCTURE:
• Most infrastructure projects are
long term in nature and requires
low interest rates. Most commercial
banks do not fund such projects. In
China in the 1990’s, the
Government set up three
developmental banks namely ICBC,
China Agricultural Bank and China
Construction Bank. These banks
undertook infrastructure projects
amounting to over USD 100 billion
every year. These capital projects
have allowed the Chinese economy
to sustain its rapid growth (South
Asia Analysis Group, 27 April 2010).
RELEVANT LESSONS?....CONT’D
CREDIT AVAILABILITY (LOCAL CAPACITY TO DRIVE MTP
GOALS):?
• Most developmental banks in the Sub Sahara Africa
are failing to operate efficiently mainly due to
undercapitalization. According to the World Bank,
Africa requires over US$480 billion for capitalization
but their economies are not able to sustain such
projects.
• African economies are not able to efficiently un lock
the huge growth potential that exists.
• In Zimbabwe, the IDBZ is also not adequately
funded.
ALTERNATIVE FUNDING
SOURCES – MISSED
OPPORTUNITIES?
• ZIMBABWE HAS JOINED THE
COMPETITION FOR GLOBAL
INVESTMENT FLOWS
•OVER THE PAST TWO
DECADES, FOREIGN DIRECT
INVESTMENT (FDI) HAS
BECOME A VITAL SOURCE OF
ECONOMIC DEVELOPMENT
FOR THE AFRICAN
CONTINENT.
•WITH AN INCREASE FROM
APPROX US$ 9 BN IN 2000 TO
US$ 18BN IN 2004 AND US$
88 BN IN 2008 FDI HAS
BECOME A MAJOR COURCE
OF FINANCE FOR AFRICA.
ZIMBABWE AS A
COMPETITIVE
INVESTMENT
DESTINATION. How do we
score?
• PROSPECTIVE INVESTORS
COMPARE THE FOLLOWING
FACTORS ACROSS MARKETS:
– Political and macroeconomic
stability;
– Growth levels & market size;
– Availability of natural resources;
– Infrastructure development;
– Governance record;
– Regulatory environments &
efficiency; and
– Investment promotion
strategies (e.g. incentives).
IMPERATIVE TO ALLOW
SOME FLEXIBILITY IN
NATIONAL STRATEGIC
PLANNING
• Dealing with unforeseen
developments (world economic
crisis – double dip)
• Trading currency volatility –
what is our alternate plan when
the US dollar strengthens and
renders our exports
uncompetitive
• Funding constraints – delays in
project/programme take-off
• Capacity constraints – e.g.
technical; data; implementation
& monitoring
• Engaging international
development partners &
financiers
ROLE CLARITY
• Development drivers - private
sector investment
• Enablers – government, through
policy framework
• Success factors:
– Funding
– Manpower (capacity issues)
– Infrastructure (energy, water,
transport, etc)
• Lets avoid surprises – every year
we must measure our progress or
lack of it (and institute corrective
action)
• Expected outcomes – poverty
reduction through employment
creation and entrepreneurial
development
CONCUDING REMARKS
• COMPREHENSIVE PLAN
• DEVELOPMENT DIRECTION LAID
OUT FOR ALL (SIFT FOR
OPPORTUNITIES)
• TARGETS ARE AND SOME ARE
ACHIEVABLE. CRITICAL FACTORS:
• ROLE CLARITY IS MAINTAINED
• CONDUCIVE ENVIRONMENT FOR
INVESTMENT IS SET
• ACCOUNTABILITY IS ENFORCED
• MONITORING & EVALUATION
STRENGTHENS BUY-IN
• REAL TEST IS ON PLAN
EXECUTION, MONITORING &
REVIEW