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2002-05-01 | Books

CASE STUDY 2: Zimbabwe: Economy-Wide Policies And Deforestation: Applied General Equilibrium Modelling

MacGregor, J., and J. Stage. 2002. "Environmental accounting as a tool for policy analysis – examples from Namibia". In G. Milne (ed.) Environmental Economics and Natural Resource Policy Analysis: Training Manual for the Forum for Economics
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This chapter of the book uses a computable general equilibrium (CGE)
approach to capture the different interactions and their influence on the consequent impact of policy reforms on the economy and deforestation in Namibia.

The 1990s in Zimbabwe can be described as the era of economic reforms. Since 1991 the Government has pursued a market-oriented strategy aimed at economic growth and poverty reduction. The first phase of this strategy (1991-1996) was implemented under the Economic Structural Adjustment Programme (ESAP). The second phase (1996-2000) is currently being implemented following the policy framework enunciated in the Zimbabwe Programme for Economic and Social Transformation (ZIMPREST). The benefits of structural reforms, in particular, have been many, but combined with initially adverse external shocks (bad weather and sluggish world growth) and poor policy sequencing, these policy shifts had significant effects on output growth, poverty and income distribution, with environmental and political repercussions that are still working themselves out.

Adjustment is usually seen as merely a macroeconomic problem because of its strong link to
stabilisation, which deals with the full restoration of internal as well as external equilibrium
of the economy. But the aim of economic reforms is larger: it is meant to place the economy
on a new efficient path. Unprecedented concern over the effects of the economic crisis has
somewhat obscured its truly disturbing consequences: the increased exploitation of fragile
natural resources hence leading to environmental degradation in Zimbabwe. It is estimated
that the country is losing 0.6 per cent of its forest area of about 23 million hectares annually.
Land clearance for agricultural purposes accounts for more deforestation than all other agents
put together. According to Campbell and Whitlow (1989) some 52 000 ha of woodland were
converted to cropped land annually between 1963 and 1977. During this time both large scale
commercial farmers and small scale farmers were responsible for clearing. However, since
independence in 1980, small scale/rural farmers have mainly been responsible for land
clearing for agriculture. The estimated amount of deforestation has since then been estimated
to be 70 000 ha of land per year. Evidence of this is found in the sharp increases in areas
under various crops over the years. For instance, the area for maize has increased from 649
000 ha in 1970-72 to 966 000 ha in 1987-89. Currently some communal areas no longer have
any natural forests and have become a market for wood sales from resettlement and commercial farming areas. It is estimated that about 1.5 million hectares out of the total of
1.8 million hectares of eroded land is in the communal areas and about half is crop-land and
half non-cropland.

Economic reforms affect deforestation in several ways. First, reforms make shifts towards
tradeables and exports particularly attractive. In agriculture, a shift towards export crops and
processed forest products can lead to a degradation of such natural resources as forests.
Industrialisation and production of manufactured goods for export can have a similar effect
not only on agricultural resources but also on urban environment, thus polluting air and
water. Secondly, if export crops cause more soil erosion and land degradation than food
crops, the effect of reforms on deforestation can be adverse. Thirdly, indirectly by
contributing to greater poverty at least in the short run (through an increase in food prices for
example) economic reforms can accelerate environmental degradation. Reforms can
exacerbate social polarisation as the costs and benefits of reforms accumulate differentially to
social groups. This takes place through relative price and income distributional shifts.
Environmental pressures intensify due to a combination of factors resulting from the skewed
income redistribution. By favouring the rich, this may enhance their capacity to degrade,
leading to unregulated resource exploitation by elites. The poor, on the other hand, intensify
pressure on the environment as a survival tactic. Fourthly, to reduce political pressure, the
government has decided to subsidise the poor with natural assets in the form of a sweeping
land reform, which if done without complementary measures (such as access to agroeconomy
technology and credit systems) can have further aggravated environmental stress,
especially in the so-called resettled areas.

To capture these different interactions and their influence on the consequent impact of policy
reforms on the economy and deforestation, a computable general equilibrium (CGE)
approach was used. Although not directly aimed at the forestry sector, economy-wide policies
have an impact upon deforestation and forest degradation. In fact, a study by the World Bank
concludes that policy spillovers are among the major causes of global deforestation.
Following this argument, the main response to deforestation lies with measures that operate
outside the forest. CGE models are an appropriate tool to comprehensively analyse such policy spillovers (Devarajan 1990). They simulate for the entire economy the interactions
between production and consumption simultaneously.