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The Zimbabwe economy in 2007
Brian MacGarry
June 21, 2008

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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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