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Unpacking the Zimbabwe Government’s COVID-19 Economic Stimulus Package

On 4 May 2020, the Government of Zimbabwe, through the Ministry of Finance and Economic Development, announced a ZWL$18 billion COVID-19 economic recovery and stimulus package including measures to provide liquidity support to several sectors, including agriculture, mining, tourism, SMEs, expand social safety nets and food grants, and set up a health sector support fund. The stimulus package, equivalent to 9% of the country’s GDP, was meant to put Zimbabwe on a recovery trajectory following the devastating impact of the COVID-19 coronavirus which the World Health Organisation has declared a global pandemic. This is a commitment by the government against a background of complex monetary and fiscal challenges that Zimbabwe has suffered for over two decades now.

Zimbabweans from all walks of life have debated the economic stimulus package and raised concerns focusing on three main issues: the priorities of the package; the legality of a stimulus package that has not been approved by Parliament; and, the funding for the stimulus package. History has demonstrated that Zimbabwe faces challenges with raising resources locally, sometimes misallocates or wastes resources raised from domestic revenue streams and the broken international re-engagement framework that has failed to unlock significant resources even in the face of a devastating pandemic.

The need for an economic stimulus package is not questioned. Globally and even regionally, closer to home, South Africa has done its own stimulus package worth R18 billion targeted at empowering its citizens, its local entrepreneurs, businesses and workers post COVID-19. The South Africa package provided a template for Zimbabwe in terms of influencing COVID-19 response measures. The need for economic stimulus packages is also critical for countries that had pre-existing economic challenges like recessions, limited fiscal space, and huge debt overhangs, as is the case with Zimbabwe.

The United Nations Independent Expert on Foreign Debt and Human Rights, Yuefen Li, noted that the pandemic has widely exposed the debt vulnerability of many developing countries, and aptly put it in her statement that there is need to look at the raging health calamity with another eye. There is need to comprehensively address the immediate crisis simultaneously with the other economic, financial and social crises caused by the COVID-19 pandemic. Zimbabwe’s COVID-19 measures to slow the spread of the pandemic have literally taken an economy in comatose off the life support. As such, an urgent, far reaching stimulus package is required from the government. Economists have made projections pointing to a dire situation for the economy and for livelihoods of the majority vulnerable citizens who live below the poverty datum line, which is ZWL$7000 per month, according to the Consumer Council of Zimbabwe. The situation has been made worse for many workers both in the formal and informal sector who have had to face income losses and slashes with no prospects of bouncing back unless something dramatic happens.

On a global scale, the IMF has projected that the global economy is going to shrink by -3% in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario–which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support. This looks easy, but not for a country like Zimbabwe where the projection shows a bleak picture of Real GDP % change of -7.4 in 2020.

In the IMF Article IV Consultations report at the end of a Staff Monitored Programme ( SMP) for Zimbabwe released in March 2020, it is clear that Zimbabwe’s recovery is not going to be rapid, it has to take the steps, one step at a time, and continue on that path for a long haul with serious policy commitment and consistent steps. The report, which acknowledges that it did not factor in the impact of COVID-19, paints a bleak future and obliterates any hope unless there are significant interventions and policy changes. In the report, the IMF notes that; Zimbabwe is experiencing an economic and humanitarian crisis…..” The crisis is also as a result of policy missteps on the side of the government. It is against this backdrop that Zimbabwe launched a USD2, 2 billion Humanitarian Response Plan issued in March 2020 followed by the ZWL18 billion COVID-19 Recovery Stimulus package in May 2020.

While the Stimulus package has prioritised key sectors, the allocations to the different sector must have been subjected to thorough interrogation as to where the priorities lie in the short, medium and long terms. For example, the allocation of ZWL$ 6, 08 billion to agriculture for the financing of the winter wheat and the 2020/2021 needs to be subjected to scrutiny on a cost benefit analysis of the “command agriculture “where gross misuse of public funds were unearthed in previous Auditor General’s reports. More resources could have been allocated to the relief measures and food in the short term which in the package received ZWL$ 1, 50 billion and ZWL$2, 40 billion, respectively. Broadly the GoZ needs to address the fundamentals and put the country on a sustainable development and growth trajectory that gives the people genuine empowerment and freedoms as propounded by Professor Amartya Sen in his book “Development as Freedom” in 2000.

A robust economic stimulus package should focus on reinvigorating systems, renewing a multifaceted governance fabric, support to a resilient society and the defence and promotion of human rights. If I were to give the government of Zimbabwe advice on what their economic stimulus package should entail and prioritise, I would say they must focus on the following 8 key areas that have short, medium and long term considerations for Zimbabwe:

  • Investment in building the torn social fibre and societal cohesion. Any economic stimulus package that is not cognisant of the cost of social unrests emanating from the structural and systemic drivers related to rising poverty, inequalities, poor governance, and the hunger for democratisation will suffer a still birth.
  • Focus on technology define and blaze the economic recovery path. COVID-19 has shown us that we are in the age of technology and this is at different levels no matter how elementary. Technology can be used to eliminate corruption significantly; it can integrate the informal sector into the economy and for accountability by the government.
  • Improve infrastructure for trade and local manufacturing. COVID-19 once again vindicated the need for endogenous development. Building national, regional and continental value chains must be a priority. Beitbridge Border post is the gateway to the region for Zimbabwe and the revamping of the Border infrastructure and the Road cannot be silent in any economic stimulus package. All national connections are also very important.
  • Zimbabwe has a youthful population, a demographic dividend, and women, should be targeted by the economic stimulus package. Zimbabwe currently has a huge youthful and female population that does not contribute to an economic transition due to marginalisation and exclusion in productive and decent employment.
  • Address the huge poverty and inequality gap. To date and in the current stimulus package, the allocation to cushion citizens is paltry and inadequate to cover the human rights needs of vulnerable groups. Income must be put in the pocket of the citizens than offering subsidies that line pockets of a few connected elite. This is a short-term cash transfer to citizens from the billions that have vanished in subsidising agriculture, fuel among others.
  • A robust social sector support is essential. The shocking underfunding of the social sectors namely water, sanitation, health and education was exposed by the COVID-19. Clearly with commitment the resilience of these sectors to cope with disaster shocks could be enhanced if for years there was no neglect of the sectors by the government.
  • Boosting a truly people-based agricultural system and not for the elite to have access to the RBZ for public funds. Food security is under threat despite previous financing of the agricultural sector. During the COVID-19 Lockdown people have depended on small scale producers for their food requirements. There is need to curb losses by small scale producers and invest in agro-processing going forward. Zimbabwe can be a breadbasket of Africa once again.
  • Disasters due to climate change and diseases are here to stay. Citizens’ resilience, capacities to survive, cope and recover the shocks is critical. There is need to develop and finance a coping mechanism for the future.

These are just suggestions and pointers to where the citizens’ aspirations lie. It is through robust debate and public engagement that policies are reviewed and improved to secure people’s livelihoods, and ensure lasting, rights-respecting economic development. It is up to the Zimbabwe authorities to embark on broad consultations to capture different views from citizens, and going granular on building strong institutions to carry the economic stimulus package to full term.

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