In this regard, one misstep that should be avoided is a possible rush to de-dollarise the economy through the bond notes programme. Sustainable de-dollarisation should be anchored on improvement in the macroeconomic environment, through measures such as the aforementioned fiscal consolidation, to bolster confidence and attract investment.
From a policy standpoint, there is growing evidence of efforts to boost investment. The Incentive for Diaspora Investment Accounts, for instance, seeks to harness the potential of remittances through a 7 per cent incentive in addition to the interest extended by banks.
The more daunting question is whether Zimbabwe can take advantage of its position in the Southern African Development Community (SADC) to potentially enhance revenue inflows. With SADC consuming 68.5 per cent of Zimbabwe’s exports, it is an opportune moment to pivot the trade integration lever.
Addressing both tariff and non-tariff barriers such as border delays could potentially extend the reach of traders into wider destination markets within the region. This will be particularly important given Zimbabwe’s low performance in trade integration.
Coming against the backdrop of the Statutory Instrument 64 (2016) which barred importation of select goods from South Africa, the onus will be on Zimbabwe to demonstrate commitment to a U-turn from the trade protectionism that undermined its integration in the region.
Given the relatively underdeveloped state of the country’s manufacturing sector, it is unlikely that the new administration will front-load such a policy stance at the risk of a backlash from domestic industry. In the medium to long-term, however, deeper trade ties with the region will be one of the pillars through which the economy will fend off balance of trade pressures.
The fluidity of reform implementation
Reforming a country is not an easy task. Zimbabwe faces such a challenge today. It is not enough for a country to find itself at a juncture fertile for much needed reforms. History suggests that even in instances where bold and well-intended reforms are scheduled for implementation, the twin risks of lethargy in execution and counterproductive sequencing, or pacing, could derail any reform agenda.
With considerable socio-economic odds and manic expectation from the public, Zimbabwe’s government ought to be aware of the perils of quick fixes and the imperative trade-off between short-term respite and a more stable long-term path to recovery.
In view of the much anticipated general election, it is important that the government delivers a credible poll which not only lends credence to the perception of a stark break away from the past but more importantly infuses confidence in the capacity of state institutions to lead from the front in charting the way forward.
Potential risks notwithstanding, Zimbabwe could benefit from the tailwind of an upswing in commodity prices to roll out a raft of reforms. For now, higher commodity prices have subdued the monetary and fiscal pressures encountered in the recent past, thus bringing about a growth spurt in Sub-Saharan Africa.
By Julians Amboko from LSE Business Review