The World Bank has said Zimbabwe’s strong economic foundations in the form of excellent human capital, rich mineral resources, and its policy reform efforts will be critical in driving productivity and progress towards the attainment of its aspirational targets for Vision 2030.
This was said by World Bank country manager Marjorie Mpundu at the launch of the Country Economic Memorandum (CEM) report yesterday, stressing removing price and exchange rate distortions and creating conditions for productivity-enhancing investments has been a necessary condition in the transition towards Upper Middle Income Economy (UMIC) status by 2030.
“We hope the findings of the report will support the implementation of the National Development Strategy (NDS1) and inform the identification of key reforms in the future national development strategies,” she said.
The World Bank produces CEM reports in all countries where it operates.
The reports take a long-term view of economic developments in the country and recommend policy options to support inclusive economic growth and poverty reduction.
In Zimbabwe, Ms Mpundu said the last CEM for Zimbabwe was done a few generations ago, in 1985.
She said the CEM titled “Boosting Productivity and Quality Jobs” has its key focus on structural reforms to boost productivity.
Ms Mpundu noted that according to findings in the report, achieving the targets for the Vision 2030 goal will require a faster pace of economic growth, particularly productivity-linked growth.
“Our simulations show that productivity in Zimbabwe will need to grow by 8-9 percent per year, much faster than the current growth rates.
“This is a significant challenge that requires some drastic changes in the policy environment,” she said.
She noted that lessons from other countries have shown that the transition to an upper middle-income economy took place in three tracks–macroeconomic stability, good institutions, and structural transformation.
Of these three, macroeconomic stability was a necessary condition for the success of the institution-building and restructuring of the economy.
Ms Mpundu said the report identified several constraints to productivity growth that include: limited financing for private investment and public infrastructure; high informality; high cost of production; and weak learning from international trade.
The root cause of these constraints, she said, was partly attributable to macroeconomic challenges and inefficient allocation of resources while the inefficient allocation of resources across firms and sectors had hindered the growth of formal firms.
Zimbabwe, the World Bank country had said, had several pathways to accelerate productivity growth and ensure quality jobs.
She said the Southern African country had significant unrealised potential with its skilled labour force and abundant natural and mineral resources.
“In fact, in terms of skill levels, Zimbabwe fares very well compared to its aspirational peers in the region-the countries that have already transitioned to Upper-Middle income status.
“We believe that there are pathways that will help Zimbabwe in its quest to unleash this potential,” she said.
According to the CEM report, macroeconomic policies implemented by the Government to stabilise the economy have served Zimbabwe well.
It also said consolidating public finances took place in a difficult environment, with climate shocks and negative impacts of the Covid-19 pandemic while a tight monetary policy slowed overall money supply growth. Together with foreign exchange market measures, the Government’s policies had contained an inflation resurgence.
The World Bank report noted that the policy measures were supported by institutional improvements such as more transparent debt management and the creation of the Zimbabwe Investment and Development Agency (ZIDA).
The CEM report noted that recent trends in productivity growth are encouraging, especially in industry and services although agriculture was seen as still lagging compared to the other two.