The Road to Vision 2030: Recapturing economic reforms Under the Transitional Stabilisation Programme

By Tinashe Mukori

Laying the Foundation for Economic Recovery

In October 2018, the Second Republic under President Emmerson Mnangagwa introduced the Transitional Stabilisation Programme (TSP) as an economic blueprint designed to set Zimbabwe on a path of sustainable recovery.

The TSP was crafted as a crucial intervention to stabilize the economy, curb inflation, reform public finances, and create an environment conducive to investment and growth.

Its primary objective was to restore macroeconomic stability and financial sector confidence, while simultaneously stimulating economic activity and preparing the ground for Zimbabwe’s long-term development Vision – Vision 2030, which aims to transform the country into an upper-middle-income economy.

The programme sought to achieve this through a series of structural reforms, addressing longstanding economic challenges and initiating quick-win measures for tangible progress.

Understanding the objectives of TSP and the economic conditions that existed prior to its introduction is crucial to appreciate and ascertain the achievements and milestones of TSP. It is very crucial to point out that the success of any policy is determined by the attainment of its articulated objectives.

Economic Challenges Before TSP

Before the adoption of the TSP, Zimbabwe’s economy was in a fragile state, marked by several deep-rooted issues including hyperinflation and currency volatility, fiscal deficits and debt burden, financial sector instability, declining industrial and agricultural productivity, external trade deficits and international isolation.

Zimbabwe had slipped back into a hyperinflationary environment, driven by foreign currency shortages, multiple exchange rates, and a loss of public confidence in the bond note introduced in 2016. The rapid depreciation of the local currency further exacerbated inflationary pressures, eroding purchasing power and destabilizing markets.

The government was operating under a widening fiscal deficit, primarily financed through domestic borrowing. Excessive spending on wages and subsidies constrained resources for developmental projects, while rising public debt levels heightened economic uncertainty.

Zimbabwe’s banking system was characterized by cash shortages, limited access to credit, and a loss of trust in formal financial institutions. The sector faced difficulties in attracting international financing due to high risk perceptions and a weak regulatory environment.

Manufacturing output had significantly declined, with industries operating at low capacity due to high production costs, unreliable energy supplies, and limited access to foreign currency. The agricultural sector, once the backbone of the economy, was struggling due to land tenure uncertainties, drought conditions, and outdated farming methods.

Persistent trade deficits, low foreign direct investment (FDI), and limited international reserves left Zimbabwe with few options for external financial support. The country also faced external debt arrears, complicating its engagement with international financial institutions and donor agencies.

With these challenges in mind, the TSP was introduced as an urgent reform agenda to restore stability, strengthen economic fundamentals, and create a strong foundation for future growth.

Milestones : Key economic reforms under the TSP

Monetary policy and exchange rate stabilization

One of the TSP’s most significant milestones was the introduction of the Foreign Exchange Dutch Auction System on June 23, 2020. This system helped in stabilizing the exchange rate, reducing price volatility, and restoring confidence in the monetary framework. Inflation, which had been spiraling out of control, saw a marked reduction as exchange rate distortions were gradually addressed.

Additionally, the government introduced a new local currency to restore monetary sovereignty and wean the economy off excessive reliance on foreign currencies. The Reserve Bank of Zimbabwe’s Monetary Policy Committee was strengthened, reserve money supply was tightened, and speculative borrowing was curtailed to bring inflation under control.

Fiscal consolidation and public finance reforms

To address the persistent budget deficits, the government undertook fiscal consolidation measures, which included:

¶ Plugging revenue leakages and improving tax collection efficiency.

¶ Discontinuing central bank borrowing to avoid inflationary financing.

¶ Reducing the public sector wage bill, which was brought down from 92% to 50% of the national budget through post rationalization and freezing non-critical hiring.

¶ Reforming state procurement and public finance management to enhance transparency and efficiency.

As a result, for the first time in years, Zimbabwe recorded a budget surplus of more than $1billion by June 2020. These funds were directed towards social service delivery, disaster relief (Cyclone Idai and COVID-19 response), and infrastructure development.

Infrastructure development

Recognizing the critical role of infrastructure in economic growth, the government allocated $6.5 billion towards road rehabilitation, power generation, and water infrastructure projects. This investment was pivotal in:

¶ Upgrading the national road network, improving connectivity and trade efficiency.

¶ Boosting power generation capacity, addressing energy shortages that had hampered industrial productivity.

¶ Enhancing water supply and sanitation systems, particularly in urban areas.

Business Environment and Investment Reforms

The government made significant strides in improving the ease of doing business, with reforms that included:

¶ Streamlining business registration to reduce bureaucratic hurdles.

¶ Establishing a One-Stop-Shop Investment Centre, which improved investor confidence.

¶ Repealing the Indigenization and Economic Empowerment Act, replacing it with a more investor-friendly framework.

These efforts paid off, with Zimbabwe climbing 15 places in the World Bank’s 2020 Doing Business Index, earning recognition as one of the top 20 global business reformers and top five in Africa.

Economic diversification beyond mining

The TSP emphasized the need to diversify the economy, reducing overreliance on mining by promoting agricultural revival programs, including mechanization and irrigation expansion.

Support for the manufacturing sector was enhanced , enabling local industries to increase production and substitute imports.

Tourism development, leveraging Zimbabwe’s natural attractions to generate foreign currency inflows was also prioritized.

Devolution and regional economic development

Under the TSP, the government allocated more resources towards provincial and local authorities to empower communities in decision-making and economic planning. Victoria Falls was designated a Special Economic Zone (SEZ), attracting investment in tourism and hospitality.

Re-engagement with the international community

A key pillar of the TSP was Zimbabwe’s diplomatic re-engagement efforts, aimed at normalizing, relations with international financial institutions, creditors, and foreign investors. The government sought to clear external debt arrears, attract new investment, and strengthen ties with the Zimbabwean diaspora to mobilize skills and capital.

In pursuit of debt resolution, Government sought the help of Dr Adesina, the President of African Development Bank and former Mozambican leader Joaquim Chissano to spearhead talks with creditors including the World Bank, Paris Club, European Investment Bank and the AfDB. It also hired Global Sovereign Advisory and Kepler-Karst to assist.

While the TSP delivered notable achievements, including inflation reduction, improved revenue collection, increased investment, and infrastructure growth, elimination of meandering fuel queus and empty shop shelves, it faced significant hurdles, particularly due to external shocks like Cyclone Idai (2019) and the COVID-19 pandemic.

Some targets remained unmet, including full currency stability and achieving a fully diversified economy. However, the programme laid a strong foundation for the next phase of reforms under the National Development Strategies (NDS1 & NDS2).

A Stepping Stone Towards Vision 2030

The Transitional Stabilisation Programme was a critical turning point in Zimbabwe’s economic recovery. While it did not resolve all the structural challenges overnight, it was a necessary shock therapy that successfully set Zimbabwe on a more sustainable economic trajectory, positioning the country for stronger growth under Vision 2030.

With continued policy consistency, investment in productive sectors, and further institutional reforms under the leadership of President ED, Zimbabwe is on the right path toward achieving its long-term developmental aspirations. The road to Vision 2030 remains challenging, but the foundations laid by the TSP provide a solid base upon which the nation can build a more resilient and prosperous economy

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