Zimbabwe Policy Profile - 1980 to 1988

During the 1980s, most African countries implemented major policy reforms and economic adjustments designed to address the long term imbalances between domestic demand and supply, a cause of growing external deficits and of slowing of economic growth. Domestic policies are blamed as a major cause of these imbalances. In the late 1970s, as economic difficulties grew in most of Sub-Saharan Africa, countries were unsuccessful in obtaining external financial support essential to restore economic growth. With growing constraints on the availability of capital, the International Monetary Fund (IMF) and the World Bank made loans contingent, to a large extent, on a set of macroeconomic policy reforms aimed at increasing productive capacity. The objective of this paper is to evaluate changes in the key economic indicators and establish both quantitative and qualitative relationships between performance indicators and policies. The main focus is on macroeconomic and agricultural policies. A brief overview of Zimbabwe's economic situation in the early 1980s and the basis for policy change is given. Then, an evaluation of overall economic and agricultural response to policy changes is presented. The analysis is based on a simple growth model with internal investment and exports as endogenous variables. The analysis of the agricultural sector policy response is based on establishing a qualitative relationship between policy variables and performance. While data are insufficient to estimate a full-scale structural model of Zimbabwe's economy, the results can be useful in establishing the fundamental causal relationships between economic indicators and macroeconomic policies.