Zimbabwe reaps rich aid harvest
Zimbabwe has pulled off something of an international aid coup. More than $1.8 billion has been pledged by the world community to the fledgling African nation over the next three years at the Zimbabwe Conference on Reconstruction and Development.
Delegates attending the donor conference point out that the aid granted to Zimbabwe amounts to almost $250 per head of population. That makes the country the recipient of one of the highest -- if not the highest -- levels of aid ever granted by the international community.
Leading the way is the World Bank, which has pledged $430 million, followed by Britain with $315 million and the United States with $210 million. The European Community is pledging $180 million. The response has so gratified this new independent country, just emerging from years of guerrilla warfare, that Tom Mswaka, minister for economic planning, rated this week's conference "more than a success."
What is more, while roughly half of the aid is in the form of outright grants and the other half in soft loans, some of the loans are so soft as to make them virtually indistiguishable from grants. The amount pledged before the conference, so-called "old money," amounted to some $480 million. To that, a further $1.35 billion was pledged during the conference, making some $1.8 billion in all. Two-thirds of that is designed to finance land resettlement and rural development programs.
The total aid pledged to Zimbabwe since independence a year ago now exceeds the well-publicized target figure of $1.5 billion proposed by the former US Secretary of State Henry Kissinger in 1976. Surpassing the Kissinger target is regarded here as a considerable achievement, given the current state of the world economy and the cutbacks in overall aid programs by such countries as the US and Britain.
Officials here say that more important than the fact of whether the initial aid target has been surpassed or not is the fact that Zimbabwe now has as much aid as it culd realistically be expected to absorb, given the severe transport, balance of payments, and skilled manpower contraints evident in the economy.
But generous though the aid pledges may be, they represent far less than a complete answer to Zimbabwe's present economic problems.
After a very successful year in 1980, during which the real gross product is estimated to have risen by more than 7 percent, exports jumped by close to one third, maize output more than doubled to record levels, and industrial production increased 15 percent, the economy now is facing "overheating" problems.
Consumer demand is running well ahead of both industrial capacity and import capacity, and skilled labor is at a great premium.
The continued high level of white emigration is exacerbating the shortage of skills. Some 2,200 people left the country in January this year -- the second highest monthly figure on record -- and this high level of white emigration is expected to last well into the second half of the year.
The white population of Zimbabwe, which reached a peak of 275,000 in the middle of 1970s, is now estimated at 200,000 and is likely to fall to around the 150,000 level by the mid-1980s. Expatriate and contract whites are being brought into the country, but the government is opposed to employment of such foreigners if this can be avoided.
Transport problems are increasingly severe, with Zimbabwe railways apparently unable to move than one third of potential available traffic.
The record maize crop is going to impose an enormous burden, not only on Zimbabwe's transport infrastructure, but also on its storage and financing capacity. Zimbabwe will have more than one million tons of maize to export in 1981, but it does not have the transport capacity to handle so large a crop.
A substantial amount of maize will be exported to neighboring countries -- especially Zambia, Malawi, Zaire, and Mozambique --but the signs are that at least 700,000 tons of maize will have to be stockpiled and financed until next season.
Maize is being heavily subsidized in the domestic market too. The government will either have to raise taxes to meet the maize subsidy cost (estimated at around $100 million) or agree to a significant and potentially very unpopular rise in the price of the staple food of the majority of the people. Other food prices -- for milk and meat -- will rise significantly this year following a 20 percent increase already imposed in the price of bread.
The net effect is that inflation, after being held down to some 10 percent in 1980, is likely to exceed 15 percent this year. The sharp rise in food prices will stimulate increased demands for wage increases, thereby further fueling inflationary pressures.
Other short-term problems include a budget deficit of some $650 million, the financing of which led last year to a 34 percent jump in the money supply. A further such increase has been forecast by the minister of finance in 1981. Clearly, the government needs to come to grips with the level of state spending, but to do this would imply cutting back on some of the very ambitious social programs -- especially in the health, food subsidy, and education fields -- to which it is committed.
But any pulling back here could have severe political consequences and, accordingly, few observers believe that the government can -- or will -- materially restrain its spending in the months ahead.
In other words, despite the substantially better-than-anticipated aid pledges the Zimbabwe economy still faces serious problems, although they are problems arising from prosperity rather than recession.