Sunday, September 21, 2008

Zim's long road to recovery

from UK Financial Times

..(The UNDP )The report, "Comprehensive Economic Recovery in Zimbabwe", is due to be published today....

A minimum of $5bn (€3.5bn, £2.7bn) in foreign aid, including debt relief, will be needed over the next five years - $1.62bn of that in the first year - if the government is to plug financing gaps, revive infrastructure and stave off hunger among the 5m Zimbabweans threatened by starvation. This would make it one of the largest recipients of aid in Africa.

Those figures would be significantly higher if pensioners were reimbursed for savings eviscerated by the collapse of the currency, and thousands of white farmers driven from their land by Mr Mugabe's resettlement programme compensated.,,,

At the same time, at least 2m of the 12m population have emigrated to South Africa, the UK, Botswana and other countries, many of them skilled workers and professionals. Eighty per cent of medical personnel trained since 1980 have left the country.

A prerequisite for recovery will be plugging vast budget deficits financed in recent years by money-printing and credit creation. This has driven inflation to a world record of about 40m per cent and created a nation of pauperised trillionaires. The mechanisms used to tackle hyperinflation could make the difference between a short-term bust followed by recovery, and a near-term consumption boom followed by recession.

In a "lost" decade Zimbab-we's economy has contracted 37 per cent, while the rest of sub-Saharan Africa made average gains of 40 per cent. It would take uninterrupted growth of 5 per cent annually until 2020 to recover peak per capita income levels. A more likely average is less than 4 per cent, the report's authors suggest.

The government will need to act decisively at the outset when "opposition to radical reforms is likely to be weakest", the report argues, warning of the dangers of "a constrained decision making fostering consensus style compromises that both delay and undermine reforms".

Britain, the US and the European Union have all reacted cautiously to last week's deal, partly because they believe this is the most likely scenario...

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