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Zimbabwe's Economic Improvement Plan May Be Hindering Progress: Analyst

President Emmerson Mnangagwa at Zimbabwe International Trade Fair 2022
President Emmerson Mnangagwa at Zimbabwe International Trade Fair 2022

The government's new measures to reverse the economy’s continuing fall are having the opposite effect, as critics warned. More on the story from Bulawayo.

President Emmerson Mnangagwa has announced measures to reverse an economic downturn characterized by hyperinflation, the local currency’s plunge and growing public unrest.

Mnangagwa's moves come in response to the suspension of bank lending, which is stifling the economy, particularly in the agricultural sector. The situation has prompted industry players such as major agricultural processing firm Dairibord to called off a scheduled dividend payout to shareholders.

In a letter to sugar cane farmers that VOA obtained, Tongaat Hullet, a South African sugar manufacturing subsidiary, indicates it is suspending all payments for the 2022 to 2023 season that it makes through bank-accessed loans. Small holder farmers attempting to purchase agricultural implements say they were refused payment using local currency.

Conversely, farmers are apprehensive about payment in the local currency for their crop deliveries to the Grain Marketing Board after harvest, given that they are compelled to pay for imports of herbicides and farm equipments in foreign currency. Economic analyst Gift Mugano says suspending lending by banks is signing a death sentence for the economy.

"As you see now," Mugano says, "these companies which are issuing statements use finance from the banking sector loans to pre-finance production. But now because that capability has been taken away, particularly if you look at Tongaatt Hullet, they cannot continue to guarantee that funding of farmers and are now saying `we are suspending.’"

Mugano says business prospects for the country are bleak.

"What it means is that we are going to see bankruptcy across all the value chains,' hde says. "Farmers are going to be bankrupt, businesses are going to be bankrupt. At a macro level it means deindustrialisation, it means aggregate demand is going to fall. Going into recession." Mugano added "You are leaving room for South African and Zambian companies, regional companies, to come and supply into Zimbabwe."

Observers such as Mugano also say indications point toward the forced end of the multi-currency system and rejection of the Zimbabwean dollar altogether.