Economy of Zimbabwe


Economy of Zimbabwe

Infobox Economy
country = Zimbabwe


width=
caption=
currency=Zimbabwean dollar (ZWD)
year=calendar year
organs=WTO
rank=104th (IMF); 149th (CIA); 127th (WB)
gdp=USD $28.098 billion (2007) (IMF); USD $6.186 billion (2007) (CIA+WB)
growth=-5.7% (2007) -3.6% (2008) (IMF est.)
per capita=USD $500 (2007 est.)
sectors=Agriculture: 16.7%, Industry: 21.6%, Services: 61.6% (2007)
inflation= 2,200,000% (CSO - July 2008) [http://news.bbc.co.uk/1/hi/business/7509715.stm] private estimates are much higher. 12.5 million % [http://www.zimbabwesituation.com/jul18_2008.html#Z17]
poverty=80% earn below poverty line of ZWD 13 Trillion per month (USD $41.00) (July 2008). However, the average wage is only ZWD 100 Billion (30c) per month. [http://www.zimbabwesituation.com/jul17b_2008.html#Z2]
gini=50.1% (1995) 56.8% (2003) [http://en.wikipedia.org/wiki/List_of_countries_by_income_equality]
labor=4.23 million (2004 est.)
occupations=Agriculture: 60%, Services: 9%, Wholesale, Retail, Hotels, Restaurants: ~4%, Manufacturing: 4%, Mining: 3% (2003)
unemployment=80% (2005 to 2008 est.)
industries=mining (coal, gold, platinum, copper, nickel, tin, clay, numerous metallic and nonmetallic ores), steel; wood products, cement, chemicals, fertilizer, clothing and footwear, foodstuffs, beverages
exports=USD $1.775 billion (2006 est.)
export-goods=Cotton, tobacco, gold, ferroalloys, textiles/clothing
export-partners=South Africa 36.4%, (China, Japan, Zambia) 7.3% each, Mozambique 4.7%, (US, Botswana, Italy, Germany, Netherlands) 3.6% each (2006)
imports=USD $2.059 billion (2005 est.) f.o.b.
import-goods=machinery and transport equipment, other manufactures, chemicals, fuels
import-partners = South Africa 43%, China 4.6%, Botswana 3.3% (2005)
debt=Domestic: ZWD $60.8 trillion (rev) (01 Feb 2008), $790.6 quadrillion (rev) (31 July 2008) [http://www.zimbabwesituation.com/aug1b_2008.html#Z11] . International: USD $4.0 billion
(July 2008)
revenue=ZWD $216 billion (rev) (2006)
expenses=ZWD $451 billion (rev) (2006)
aid="recipient": $178 million; note - the EU and the US provide food aid on humanitarian grounds (2000 est.)
cianame=zi
The economy of Zimbabwe is collapsing under the weight of economic mismanagement, resulting in 85% unemployment and spiraling hyperinflation. The economy poorly transitioned in recent years, deteriorating from one of Africa's strongest economies to (as of October 2008) the world's worst.Fact|date=October 2008 Inflation has surpassed that of all other nations at over 10,000,000% (although it is impossible to calculate an accurate value), with the next highest in Burma at 39.5%cite news|https://www.cia.gov/library/publications/the-world-factbook/geos/bm.html|title=CIA - The World Factbook -- Burma|publisher="CIA"|date=May 17, 2008|accessdate=2008-05-17] . The government has attributed the economy's poor performance to ZDERA, a US congressional act hinging debt relief for Zimbabwe on democratic reform, and freezing the international assets of the ruling class. It currently has the lowest GDP real growth rate in an independent country and 3rd in total (behind Palestinian territories.)

The country has reserves of metallurgical-grade chromite. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, platinum and iron ore. However, its ongoing political turmoil and the world's highest rate of AIDS [http://www.worldpress.org/Africa/770.cfm Virgins, potions, and AIDS in Zimbabwe] , October 22, 2002. World Press.] infection have greatly hampered its progress. Spiraling inflation, which many critics argue was caused by president Robert Mugabe's policies towards land reform, have led to internal upheaval and population displacement, and poverty.

1980s

Following the Lancaster House Agreement in December 1979, the transition to majority rule in early 1980, and the lifting of sanctions, Zimbabwe enjoyed a brisk economic recovery. Real growth for 1980-1981 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However it slumped in 1986 to a zero growth rate and registered negative of about minus 3% in 1987 primarily because of drought and foreign exchange crisis faced by the country.Fact|date=December 2007 Zimbabwe's GDP grew on average by about 4.5% between 1980 and 1990.cite book|last=Steenkamp|first=Philip John|coauthors=Rodney Dobell|year=1994|title=Public Management in a Borderless Economy|pages=664]

Infrastructure and resources

Zimbabwe has adequate internal transportation and electrical power networks. Paved roads link the major urban and industrial centres, and rail lines managed by the National Railways of Zimbabwe tie it into an extensive central African railroad network with all its neighbours. In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River but augmented since 1983 by large thermal plants adjacent to the Wankie coal field. As of 2006, crumbling infrastructure and lack of spare parts for generators and coal mining means that Zimbabwe imports 40% of its power - 100 megawatts from the Democratic Republic of Congo, 200 megawatts from Mozambique, up to 450 from South Africa, and 300 megawatts from Zambia. [http://www.news24.com/News24/Africa/Zimbabwe/0,,2-11-1662_1996209,00.html Outages short Zim revival] , October 9, 2006. News24.]

Independent analysts put the inflation rate at +165,000%, a figure which critics claim is far less than the actual inflation rate. Parity rates of measurement point towards a figure of close to 500,000% but these cannot be cited for obvious reasonsVague|date=August 2008. The use of oppressive laws as manifested in the likes of the infamous National Price and Income Commission has seen the country at the bottom list of the of the World Bank Index. Recently the President of the republic signed the Empowerment bill whose effect is to transfer ownership from all foreigners into the hands of the local people, something that has already had its toll on the DIVague|date=August 2008.The telephone service is problematic, and new lines are difficult to obtainFact|date=August 2008.

Agriculture was once the backbone of the Zimbabwean economy. The result of large scale eviction of white farmers and the government's land reform efforts, means this is no longer the case. [http://www.geographyiq.com/countries/zi/Zimbabwe_economy_summary.htm Economy] , 2002. Geography IQ] Reliable crop estimates are not available due to the Zimbabwe government's attempts to hide the realities following the evictions. The ruling party banned maize imports, stating record crops for the year of 2004. [http://www.newfarm.org/international/news/2005/020105/0210/zimbabwe_crops.shtml Famine fears rooted in Zimbabwe crop failures] , February 9, 2005. The New Farm.]

The University of Zimbabwe estimates that between 2000 and 2007 agricultural production decreased by 51%. [http://www.zimbabwesituation.com/mar8_2008.html#Z11]

Maize was the country's largest crop prior to the farm evictions. Tobacco was the largest export crop followed by cotton. Poor government management has exacerbated meagre harvests caused by drought and floods, resulting in significant food shortfalls beginning in 2001. The land redistribution has been generally condemned in the developed world. It has found considerable support in Africa and a few supporters among African-American activists,Fact|date=June 2007 but Jesse Jackson commented during a visit to South Africa in June 2006, "Land reform has long been a noble goal to achieve but it has to be done in a way that minimises trauma. The process has to attract investors rather than scare them away. What is required in Zimbabwe is democratic rule, democracy is lacking in the country and that is the major cause of this economic melt down." [http://www.zimbabwesituation.com/jun21_2006.html Jesse Jackson lambasts Mugabe, SA banks] , June 20, 2006. Zimbabwe Situation.]

2000–2008

In recent years, there has been considerable economic hardship in Zimbabwe. Many western countries argue that the Government of Zimbabwe's land reform program, recurrent interference with, and intimidation of the judiciary, as well as maintenance of unrealistic price controls and exchange rates has led to a sharp drop in investor confidence.

On November 1 1989 a former government minister in Rhodesia, Denis Walker, produced a paper in London for the Conservative Monday Club's Foreign Affairs Committee on "Land Reform in Zimbabwe". In his last paragraph he stated that "once the land has been redistributed, the commercial farms will be broken up, the remaining white farmers reduced by exile or imprisonment; Zimbabwe's government, already morally bankrupt, will decline towards economic collapse."

Between 2000 and December 2007, the national economy contracted by as much as 40%; inflation vaulted to over 66,000%, and there were persistent shortages of foreign exchange, local currency, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%.

Direct foreign investment has all but evaporated. In 1998, direct foreign investment was US $400 million. In 2007, that number had fallen to US $30 million [http://www.zimbabwesituation.com/mar8_2008.html#Z11]

Billions were spent in the country's involvement in the war in the Democratic Republic of the Congo. Price controls have been imposed on a wide range of products including food (maize, bread, steak), fuel, medicines, soap, electrical appliances, yarn, window frames, building sand, agricultural machinery, fertilisers and school textbooks.

Mugabe's supporters maintain that economic hardship has been brought about by Western-backed economic sanctions instituted through the United Nations. However, the only sanctions in place are personal sanctions against about 130 senior Zanu-PF figures; there are no sanctions against trade or investment with Zimbabwe. [ [http://www.state.gov/r/pa/prs/ps/2004/30091.htm] , "U.S. Department of State", 2004]

As of February 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund (IMF). This, and the United Nations World Food Programme stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources.

Zimbabwe began experiencing severe foreign exchange shortages, exacerbated by the difference between the official rate and the black market rate in 2000. In 2004 a system of auctioning scarce foreign currency for importers was introduced, which temporarily led to a slight reduction in the foreign currency crisis, but by mid 2005 foreign currency shortages were once again chronic. The currency was devalued by the central bank twice, first to 9,000 to the US$, and then to 17,500 to the US$ on 20 July 2005, but at that date it was reported that that was only half the rate available on the black market.

In July 2005 Zimbabwe was reported to be appealing to the South African government for US$1 billion of emergency loans, but despite regular rumours that the idea was being discussed no financial support has been obtained from South Africa.

The official Zimbabwean dollar exchange rate had been frozen at Z$101,196 per U.S. dollar since early 2006, but as of 27 July 2006 the parallel (black market) rate has reached Z$550,000 per U.S. dollar. By comparison, 10 years earlier, the rate of exchange was only Z$9.13 per USD.

In August 2006 the RBZ revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar. At the same time Zimbabwe devalued the Zim Dollar by 60% against the USD. New official exchange rate revalued ZWD 250 per USD. The parallel market rate was about revalued ZWD 1,200 to 1,500 per USD (28 September 2006).Fact|date=June 2007

In November 2006 it was announced that sometime around December 1 there would be a further devaluation and that the official exchange rate would change to revalued ZWD 750 per USD. [http://www.zimbabwesituation.com/nov17_2006.html#Z12 The Zimbabwe Situation ] ] This never materialized. However, the parallel market immediately reacted to this news with the parallel rate falling to ZWD 2,000 per USD (18 November 2006) [http://www.zimbabwesituation.com/nov19_2006.html#Z3 The Zimbabwe Situation ] ] and by year end it had fallen to ZWD 3,000 per USD. [http://www.zimbabwesituation.com/jan5a_2007.html#Z13 The Zimbabwe Situation ] ]

On April 1 2007 the parallel market was asking ZWD 30,000 for $1 USD. [http://www.zimbabwesituation.com/apr1_2007.html#Z22 The Zimbabwe Situation ] ] By year end, it was down to about ZWD 2,000,000. On 18 January 2008, the Reserve Bank of Zimbabwe began to issue higher denomination ZWD bearer cheques (a banknote with an expiry date), including $10 million bearer cheques - each of which was worth less than US $1.35 (70p Sterling; 0.90 Euro) on the parallel market at the time of first issue. On April 4 2008 the Reserve Bank of Zimbabwe introduced new $25 million and $50 million bearer cheques.cite news|http://www.thetimes.co.za/PrintEdition/Article.aspx?id=742168|title=Fear and hope mingle as Harare awaits election results|publisher="www.thetimes.co.za"|date=April 6, 2008|accessdate=2008-04-08] At the time of first issue they were worth US$0.70 & US$1.40 on the parallel market respectively.

On May 1 2008, the RBZ announced that the dollar would be allowed to float in value subject to some conditions..

On May 6 2008, the RBZ issued new $100 million and $250 million bearer cheques.cite news|http://www.thetimes.co.za/News/Article.aspx?id=761117|title=Zimbabwe’s new $250m note|publisher="www.thetimes.co.za"|date=May 6, 2008|accessdate=2008-05-08] cite news|http://www.afriquenligne.fr/news/africa-news/zimbabwe-introduces-new-high-denomination-notes-200805063085.html|title=Zimbabwe introduces new high denomination notes|publisher="http://www.afriquenligne.fr"|date=May 6, 2008|accessdate=2008-05-08] . At the date of first issue the $250 million bearer cheque was worth approximately US$1.30 on the parallel market. On May 15 2008, a new $500 million bearer cheque was issued by the RBZcite news|http://www.int.iol.co.za/index.php?set_id=1&click_id=68&art_id=nw20080515103036882C968918|title=Introducing the new Zim note...|publisher="http://www.iol.co.za"|date=May 15, 2008|accessdate=2008-05-08] . At time of first issue it was worth US$1.93. In a widely unreported parallel move, on May 15 2008, the RBZ issued three "special agro-cheques" with face values $5 billion (at time of first issue - $19.30), $25 billion ($96.50) & $50 billion ($193). cite news|http://allafrica.com/stories/200805210105.html|title=RBZ Issues Agro Cheques|publisher="http://allafrica.com"|date=May 21, 2008|accessdate=2008-06-02] . It is further reported that the new agro-cheques can be used to buy any goods and services like the bearer cheques.

On July 30 2008, the Governor of the RBZ, Gideon Gono announced that the Zimbabwe dollar would be redenominated by removing 10 zeroes, with effect from August 1 2008. ZWD10billion will become 1 dollar after the redenomination. cite news|http://news.bbc.co.uk/1/hi/world/africa/7532702.stm|title=Zimbabwe introduces new currency |publisher="BBC"|date=July 30, 2008|accessdate=2008-07-30]

ee also

*Economy of Africa
*Economic history of Zimbabwe
*History of Zimbabwe
*Zimbabwean dollar

References

External links

*dmoz|Regional/Africa/Zimbabwe/Business_and_Economy/Economic_Development
* [https://www.cia.gov/library/publications/the-world-factbook/geos/zi.html CIA World Fact Book]
* [http://www.mbendi.co.za/land/af/zi/p0005.htm MBendi Zimbabwe overview]
* [http://www.zimbabwesituation.com/jun20_2007.html#Z6 Donors will move in when Mugabe finally leaves office]


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