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Crisis looms after Harare vote-buying
Tony Hawkins, The Financial Times (UK)
April 11 , 2008

http://us.ft.com/ftgateway/superpage.ft?news_id=fto041120081318558356

As hopes fade in Zimbabwe for an early end to the election stalemate there are growing fears over the enormity of a looming monetary and inflation crisis sparked by the government's vote-buying in the past six weeks.

Official figures from the Reserve Bank of Zimbabwe show that in the first three months of the year alone, government borrowing was 43 per cent above the projected budget deficit for the 2008 fiscal year which ends on December
31.

Since the start of the campaign President Robert Mugabe's ruling Zanu-PF party has announced big wage and salary awards for the security forces, schoolteachers and civil servants. It has spent hugely on imported farm equipment, and donated hundreds of buses to local communities as well as computers to schools. Although all were bought by the government they were distributed at party rallies by Mr Mugabe.

Zimbabwe's domestic debt increased sixteen-fold from Z$21,000bn (at the official rate Z$30,000 is worth US$1) at the end of 2007 to Z$343,000bn by mid-February. In the next five weeks it increased sevenfold to Z$2,539,000bn, compared with a budget deficit target for the year of Z$1,760,000bn.

More than half of this figure is government borrowing on overdraft from the central bank, with most of the balance being government treasury bills. The official figures do not disclose where the money was spent or by whom but they show that in less than three months the government borrowed and spent almost 16 per cent of projected gross domestic product for 2008.

Despite the trebling of central bank interest rates two weeks ago the money market is awash with liquidity which, bankers say, means that there has been no slowdown in government printing and spending of money.

Against a background of mounting anxiety and nervousness about the deteriorating political atmosphere share prices on the Zimbabwe Stock Exchange have almost doubled since the election, reflecting the tidal wave of liquidity injected into the market by a government desperate to buy its way back into power.

Meanwhile, amid all the confusion surrounding the release of the presidential poll results, Mr Mugabe has opted for a two-prong strategy.

He has reverted to mass intimidation, underpinned by vote-buying, that he used in the 2000 and 2002 elections, to win the second round of the presidential contest, while simultaneously pressing the Zimbabwe Election Commission to reverse some of the results of the parliamentary poll.

The ZEC has agreed to a recount in five, rejected seven applications and is considering nine. Were Zanu-PF to be declared winner in the five recounts, it would be the largest single party, which would enable the next president to form an administration that, while lacking an absolute majority would still be able to govern.

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