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The
Zimbabwe economy in 2007
Brian
MacGarry
June 21, 2008
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Introduction
Two main features dominate this year's survey: hyperinflation and
scarcity of hard figures. With the Zimbabwe dollar worth between
1/1000 and 1/2000 of its January 2007 value at year's end, the situation
fits the definition of hyperinflation: an inflation rate over 50%/month.
In 2007, ours averaged nearly 100%/month.
It is pointless to argue
about whom has the correct figure to two significant figures. If
we can be sure of one significant figure, that is an achievement.
Plans for recovery are beginning to appear, but their implementation
depends on political change.
Hyperinflation makes
it difficult to conduct any operation with a measurable turnover
time. Agriculture, on any scale is disadvantaged, but mining and
manufacturing suffer and the small and medium enterprises which
Finance Minister Mumbengegwi pins his hopes on stand little chance
of succeeding.
Zimbabwe has effectively
outsourced its economy to South Africa, sending workers south of
the Limpopo to mop up skilled jobs and receiving $500-million a
year in return. Estimates vary, but it is thought Zimbabwean migrants
in South Africa number between 800,000 and three million. They span
the spectrum of skills and income levels, from highly paid professionals
to poorer domestic and restaurant workers. There is also considerable
cross-border trade at an informal level, as Zimbabweans shop for
groceries and tradeable goods in South Africa.
The skewed exchange rate
is a root cause of our problems, but the Mugabe regime will do nothing
to remedy it. They gain too much. RBZ buys about US$500 million/year
from exporters and others at the "official rate" and then
uses this for essential imports and patronage. If a ZANU-PF person
gets foreign exchange at the official rate from the bank then they
can import a luxury vehicle, for example, for a tiny fraction of
its real cost.
So a Member of Parliament,
who gets a small salary, can in fact afford to import and drive
a top of the range SUV or luxury car. But US$500 million does not
go very far when total import demand is in excess of US$2,5 billion,
especially if a significant proportion is used to support the life
styles of the rich and privileged.
Remittances coming from
abroad could not sufficiently plug the holes left by declining exports.
Zimbabwe needed $40-million for fuel and $15million for electricity
a month. All in all, the government alone might need in excess of
$2billion annually. Although a significant amount of money is coming
in, it is in the parallel market. So whenever government needed
foreign currency in 2007, RBZ sent agents to buy it on the parallel
market. The Reserve Bank prints money to buy this foreign currency,
thus fuelling inflation.
The country experiences
chronic shortages of food, fuel oil and hard currency, and daily
water and power outages as public utilities fail to replace ageing
equipment and pay for imported spare parts.
At the same time, the
government remains in denial and the shortage of statistics which
they used to collect so assiduously seems not entirely due to the
emigration of skilled staff from the CSO.
Despite the government's
recent announcement that the NIPC would approve council budgets,
no funds have moved yet. In Bulawayo water shortage has caused a
major diarrhoea outbreak (3,600 cases between August and the end
of October), with hospitals not equipped to cope. Council officials
and residents fear a cholera outbreak very soon.. The situation
is worse when it rains, as garbage is blocking the drainage system,
Meanwhile, the handover of water and sewage services in other towns
to ZINWA has been a disaster, and the takeovers continue: Kwekwe's
sewage management was the latest example, in November.
An estimated 1.3 million
people are said to be living with HIV/AIDS in Zimbabwe with 132,000
being children below the age of 14 while over 650,000 are women.
Of these, only 91,000 people were on the government's ARV free treatment
programme.
Apart from the scandal
of such induced misery, the breakdown of the health system has a
devastating economic impact on the whole population, as productive
workers and educated people fall and die.
As people with HIV die
earlier, their overall numbers can be expected to decline and as
this gives less time in which infected people might spread the infection,
rates of infection drop. Yet government claim these declining figures
indicate a success!
Rising prices are increasing
the food cost burden of aid agencies. This is reflected in part
by the five-fold increase of the food budget of the UN WFP. Funding
for food will increase by another 35% in the next couple of years,
according to WFP head Josette Sheeran. [AHN, Rome, November 4, 2007]
At the presentation
of the World Bank's World Development Report in Berlin, it was revealed
that Official Development Assistance (ODA) to Zimbabwe had dropped
from 12% in 1990 to just 4% in 2006.
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