Zimbabwean Government spending is 29.7% of GDP. State enterprises are strongly subsidized. Taxes and tariffs are high, and state regulation is costly to companies. Starting or closing a business is slow and costly. The Zimbabwean government faces immense challenges to revive the economy after years of decline, hyperinflation and international isolation. Its policy decisions significantly impact economic performance and investor confidence.
The decision to abolish the Zimbabwean dollar and adopt the US dollar in 2009 arrested hyperinflation which had decimated savings and led to widespread shortages. This stabilized prices and allowed businesses to plan again.
In 2015— the Zimbabwean government instituted a policy mandating that all domestic transactions occur in US dollars. This increased demand for USD and sapped bank liquidity. The government is now reversing this policy to accept partial payment of taxes in local currency.
Progress on Zimbabwean political and economic reforms has been uneven but critical to re-engagement with international financial institutions. Payment of World Bank/IMF arrears could restore access to credit markets. Lifting EU/US sanctions depends on improving human rights and civil liberties.
Controversial policies like- the land reform program disrupted the vital agriculture sector which drove exports, tax revenues and GDP historically. Restitution or clarification of property rights is essential to revive commercial farming. Similar indigenization policies mandating majority local ownership in mining and manufacturing deterred investors.
Transparent government policies and respect for property rights – not radical state interventions – will improve Zimbabwe’s global competitiveness and business environment. Fighting corruption and guaranteeing free elections would signal commitment to reform. Responsible fiscal and monetary policies would control inflation and stabilize growth. With constructive policies and good governance, Zimbabwe can unleash its economic potential.
