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SMP approval for Zim: analyst view

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STAFF Monitoring Programme approval is probably the most important milestone for Zimbabwe since it went off the rail in 1998-99.

STAFF Monitoring Programme approval is probably the most important milestone for Zimbabwe since it went off the rail in 1998-99 when the country for the first time failed to service its external obligations.

Report by Daniel Ndlela

Thereafter, it was one way track for Zimbabwe with virtually all economic fundamentals catapulting into the abyss. Since 2010, Zimbabwe has been battling to deal with its external  debt overhang which reached 88% of GDP by end of 2012, without much success.

Now that the process of engagement has commenced with the IMF, in general it means that Zimbabwe will now be able to address challenges of an economic environment characterised by huge demands on the small national budget, absence of direct budget support, weak institutional capacity and very low international reserves.

Approval is, however, only the first step. Zimbabwe must now follow the required steps, already premised on its Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADDS) and Zimbabwe Reengagement Programme (ZAREP).

To me, the three overarching objectives of macroeconomic policies, Zimbabwe must now strive to follow through are: stable growth, price stability and external sector equilibrium, however, also following through social policy objectives.

The challenge will be that — as a society emerging from years of difficult political and social instability — the country should use the opportunity availed by this window of the SMP to grow and nurture sustainable growth with price stability and political stability which are the only serious tools to yield growth with equity capable of addressing inclusive growth.

Lessons Zimbabwe should learn to avoid falling onto the same trap? The programme should be a wholly owned by totality of government, private sector and civic society, and not as often claimed — a programme of the Ministry of Finance.

Despite all  the noise about Millennium Development Goals (MDG)s, which are important, the fundamental of the MDGs goals must remain stacked at pursuing higher levels of growth — the only instrument capable of reducing poverty, and this focus on complementary microeconomic measures which are always missing, when nations or government focus on Ministries of Finance alone, putting Micro and Small Medium Enterprise sector, education and infrastructure on the back-burner.

To avoid falling back hinges on political stability.

Dr Daniel Ndlela is an economic consultant who has carried out work both in Zimbabwe and the region.