Short-term effects of policy reform on tourism and the macroeconomy in Zimbabwe: Applied CGE analysis

Abstract

This article applies a short-term computable general equilibrium model for Zimbabwe to trace the direct and indirect effects of policy on the macroeconomy and tourism. The results show that the main reason why benefits from tourism are bypassing the country is because of poorly sequenced macroeconomic policies and a negative political climate. As and when the national political situation stabilises and the economy begins to grow again, an urgent macroeconomic thrust should be to implement a credible macroeconomic stabilisation programme, consisting in the main of reduced fiscal deficits, flexible foreign exchange markets and tight monetary policies to rein in inflation. However, because Zimbabwe is in arrears, there can be no programmes or lending with the International Monetary Fund and World Bank. Getting the budget in order without aid money will be very tough indeed, and the alternative is worse. It means debt deflation by means of hyperinflation.