# **2.  The Economic Reform Program and the Droughts in Zimbabwe**

Following independence, Zimbabwe allocated a high proportion of its public expenditures to social sectors. Spending on public sectors (such as health, education, transport) as a share of total government expenditures rose from 25.7 percent in 1980/1 to 34.9 percent in 1990/91 (CSO, 1997). The expenditures on public service delivery have resulted in substantial improvement in health and education coverage. However, the increased spending program has led to a growing imbalance between central government expenditures and revenues, which compromised the sustainability of the program. In order to stave off the impending inflationary and overcrowding effects of the fiscal deficits, Zimbabwe began implementing Economic Structural Adjustment Program (ESAP) in 1991.

The ESAP in Zimbabwe, like in other countries, involved a series of planned macroeconomic actions, including reductions in public spending, deregulation of the domestic economy, and less restrictive trade policies aimed at promoting sustainable economic growth. The program included cost recovery measures in education and health, as these sectors formed the core of the government’s increased spending program. ESAP also involved removal of subsidies on food items and reform of trade and exchange rate policies. Concerns have been raised over the social costs of ESAP particularly for vulnerable groups, such as the poor (Renfew 1992; Gibbon 1995). The poor were disproportionately hurt by the short-run financial volatility and economic downturns that arise due to fiscal austerity and openness to global market forces, particularly in countries such as Zimbabwe whose social and market institutions are weak to begin with.<sup>1</sup> For Zimbabwe, the implementation of ESAP was complicated by the droughts of the early 1990s. All provinces of Zimbabwe experienced below-average rainfall during the 1991/2 agricultural year, especially during the critical months of October and November when soil moisture is needed for seed germination. High dependency on rainfall made the agricultural sector and the entire economy highly vulnerable to the drought.<sup>2</sup> The drought of 1991/2 affected the entire economy, and real GDP per capita shrank by almost 12 percent in that year (CSO 1998a). It reduced domestic food production and lowered real incomes throughout the country. For instance, maize yield on all farms fell to about 1/3 of its normal levels, and agriculture’s share of total production fell from about 14 percent to below 7 percent (CSO 1998a). The country was again hit with a less severe drought in 1994/5, which was more localized in the eastern part of the country and had a major impact on agricultural yields, particularly for rainfall1 While the implementation of some of structural policy prescriptions such as removal of governmental inefficiencies could be beneficial in the medium to long run, policy reversals and failure to implement policy changes may have been harmful and actually worsened the conditions for the poor. This is particularly true in present Zimbabwe. For instance, the high level inflation and devaluation in 1997 stemmed from failure to control the deficit and to sell off parastatals. The poor may be hurt by the downturn and volatility but it is debatable that ESAP is to blame for such government policy failures. 2 Although the contribution of agriculture to Zimbabwe’s GNP is relatively lower compared to other subSaharan countries, this sector provides employment and livelihood for approximately 70 percent of the population and provides raw materials for the majority of the country’s manufactured goods and exports. Even in urban areas, many households rely on food from nearby gardens and goods remitted from rural households; these informal contributions of agriculture go largely unaccounted in national accounts. (See CSO (Central Statistical Office) 1997, 1998a, 1998b; Alwang et al. 1999, 2000) 2