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Economic crisis to fuel social unrest in Zimbabwe
ZimOnline
December 19, 2005

http://www.reliefweb.int/rw/RWB.NSF/db900SID/KHII-6K84H4?OpenDocument

HARARE - Zimbabwe is likely to drift towards social unrest in 2006 amid signs of no respite in the six-year-old free-fall of the country's once-robust economy and deteriorating political conditions, analysts have warned.

With inflation at 502.4 percent and living standards deteriorating, analysts say the conditions are ripe for a violent social upheaval unless something drastic is done by the government to arrest worsening economic hardships marked by shortages of basic commodities.

The country's annualised inflation is forecast to hit 700 percent within the next few months, driven largely by the rapid depreciation of the local dollar. The Zimbabwean unit has depreciated from around 26 000 against the United States dollar in October on the official market to about 80 000 against the greenback at present.

The exchange rate on the thriving but unofficial parallel market is even higher at around 100 000 Zimbabwe dollars to the US unit. The illegal foreign currency black-market remains the surest source of hard cash for both individuals and the corporate world.

But analysts think the litmus test for President Robert Mugabe and his government during the coming year will be how to handle the emotive issue of civil service salaries and working conditions.

Salaries for uniformed forces, teachers, health workers and other civil servants have dominated the news in the past two weeks, with the government acknowledging these were low and needed to be revised upwards.

"I foresee economic instability and more strikes as the government fails to raise enough money to pay salaries. This could lead to social unrest if not addressed properly," says Harare-based economist John Robertson.

Civil servants and some legislators are pushing for a salary adjustment of at least 500 percent in January to cushion government workers from economic hardships.

This may, however, not be possible because the government is broke and also due to the restrictive budgetary regime that Finance Minister Herbert Murerwa proposes to pursue next year.

According to Murerwa, government ministries will be required to stick to strict budgetary targets and all recurrent expenditures (which account for 75 percent of the state budget for 2006 and of which salaries are a major component) must be financed from available revenue resources and no borrowings will be entertained.

The analysts say crisis-weary Zimbabwe should, therefore, brace up for a plethora of industrial actions by civil servants and other workers, a development that will further worsen the situation in a country already hit by economic and political problems.

Robertson forecasts the rate of inflation to double next year, worsening the plight of ordinary citizens and companies.

"We are also going to witness further shrinkage in tourism," Robertson warns.

The Zimbabwe Tourism Authority - charged with the marketing of the country's tourism facilities - recently painted a gloomy picture of the state of tourism, saying that arrivals were down during the first nine months of 2005.

The worsening inflation forecast spells doom for exporters and importers who will have to contend with a steep depreciation of the Zimbabwe dollar in coming months. The exchange rate tracks movements in prices.

Compounding Zimbabwe's gloomy prospects for 2006 are the unsavoury prospects of another poor harvest, this time not due to natural phenomena but as a by-product of six years of skewed economic and political policies.

Analysts believe that for the first time since the country embarked on the destructive land reform programme in 2000, Zimbabwe, already battling severe food shortages, will next year start experiencing the real consequences of pursuing its widely-condemned agricultural policies of the past six years.

Despite prospects of an above-normal season, most farmers are unlikely to get inputs such as seeds and fertiliser on time.

"I think we will have the worst agricultural harvest because there is no fuel, seeds and fertilisers for farmers. Prices of other inputs have sharply gone up," explains Robertson.

It is estimated that Zimbabwe has foregone more than US$1.5 billion in unearned tobacco proceeds since 2001 - a direct result of the expropriation of former white-owned farms and the subsequent chasing of the farmers from their properties.

The country is now paying a heavy price for the disruptions caused by the land reform exercise as the new owners of land are either inexperienced or have no resources to feed the entire nation.

Economist James Jowa says he does not see any meaningful investment inflows until "sanity prevailed especially in the agriculture sector."

Jowa said: "Reports of ongoing disruptions of farming activities will continue to dampen confidence in the agricultural sector. As such, no meaningful investment initiatives should be expected until sanity prevails in the sector."

He believes 2006 does not hold much hope for Zimbabwe because of constraints faced by the various economic players.

The government estimates that the key agricultural sector will expand by 14.8 percent during the 2005/06 season to anchor the projected overall economic growth of between two and three-and-a-half percent in 2006.

Government has indicated that it will expend a lot of energy on strengthening extension services and procurement of livestock vaccines in 2006 in its quest to bolster agricultural production.

The analysts believe that the continued collapse of companies will add to the pressure on the government during 2006. At least 33 export companies shut down this year, according to the Export Processing Zones Authority.

"This means that there are more and more people requiring a slice of the limited resources that the government is able to give out as social welfare benefits," explains an analyst with a stock broking firm.

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