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Zimbabwe lunges towards economic despair

Inflation is running at 1 000% after reserve bank floods the country with money.

In May this year Zimbabwe placed itself under the watchful eye of the International Monetary Fund (IMF). The IMF’s so-called Staff-Monitored Programme (SMP) outlined a series of reforms intended to guide the country back to economic stability.

The reforms included fiscal adjustments, privatising state-owned assets and the elimination of central bank funding of the fiscal deficit.

In July it seemed Zimbabwe was on target to meet the IMF targets. But then catastrophe struck – and it was entirely self-created.

The Zimbabwe Reserve Bank flooded the economy with billions of dollars in support of the agricultural sector. In the space of a year, money supply exploded by 86%.

The result was inevitable and entirely predictable: inflation is now running at close to an annualised 1 000%, while incomes have gone up just 100% over the last year.

Read: Zimbabwe hikes average electricity tariff by 320% – energy regulator

“It’s disheartening,” says Eddie Cross, former Movement for Democratic Change (MDC) parliamentarian and one of the architects of the return to the Zim dollar (officially known as the RTGS or real-time gross settlement dollar).

“A year ago, a typical bus fare in Harare was 50 cents. Now it is Z$10. It’s got so expensive that many people cannot afford to travel to work.”

Milk has gone from Z$7.50 to $25 a litre in the space of a few months. The Zim dollar lurched from Z$8:US$1 a few months ago to nearly 30:1, but has since clawed its way back to 15:1 as the reserve bank embarked on a mop up operation to reclaim the billions of dollars flooded into the economy in recent months.

Zimbabweans have a saying about inflation – easy up, sticky down.

It means inflation responds rapidly to an increase in money supply, but is slow to drop when money supply growth drops. That’s exactly what is happening now.

Finance minister Mthuli Ncube is now tasked with recovering the billions of Zimbabwe dollars – effectively free money – injected into the economy. The bank accounts of several major beneficiaries have been frozen and some of the money has been reclaimed.

Despair

Zimbabweans have lived through this nightmare before, but this time the despair is more acute because there was genuine hope that conditions would improve with former president Robert Mugabe out of the picture. The country is without power for up to 18 hours a day as it struggles to pay its Eskom bill and hours-long queues at petrol stations are routine. 

The IMF has given Zimbabwe a 15% chance of meeting its SMP targets before the end of 2019. If the targets are missed, it will take another two to three years before the country can re-engage with the IMF – which is a precondition for international re-engagement.

MDC parliamentarian James Chidhakwa says conditions in the country have become intolerable, with ordinary people surviving on US$0.20 a day. “There’s no water, no cash, fuel prices are going up weekly, and groceries are becoming unaffordable.”

In November last year Zimbabwe’s external debt stood at US$8 billion and domestic debt at US$9.6 billion. But a recent Parliamentary Portfolio Committee report on public accounts shows domestic debt now sitting at US$880 million.

This massive reduction in domestic debt represents a staggering US$7 billion “grand heist by government on domestic creditors,” according to the Zimbabwe Independent.

The National Assembly is now demanding accountability for at least 17 breaches of the law on public spending.

Read: Zimbabwe central bank paid out $971m without approvals

One of the changes introduced by President Emmerson Mnangagwa is the appointment of a new board at the reserve bank and the launch of a monetary policy committee – similar to that at the SA Reserve Bank – to take control of the country’s hitherto chaotic monetary policy. It has been given clear instructions by the president to bring stability to the country’s economy.

An SMP is an informal agreement between Zimbabwe and IMF staff, and does not entail financial assistance or endorsement by the IMF executive board. Cross says there is little hope of meeting the IMF targets in the given timeframe.

If that’s the case, it will be a slow and painful climb back to any form of stability.

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Those of you with confidence in RSA should examine the parallels between SA and Zim.

After a period of violent political struggle, both had a hand over to a revolutionary movement with little experience in governance.

Both revolutionary movements were welcomed overwhelmingly by the populace.

Both had a window period in which it seemed that things would turn out well.

Both had an autocratic dictator/dictator like person in charge who viewed the country’s finances as his own personal bank account.

Both saw the take over of sophisticated infrastructure by incompetent people who presided over the collapse of that infrastructure.

In both countries the number of poor increased whilst the corrupt connected lived a life of luxury.

From both, the educated and wealthy departed in droves.

Zim is now bankrupt and there are rumors SA is not much better off.

In Zim, it is expected that there will be a major famine within months.

Why will it be different here?

They had more than enough to eat, low unemployment, the Rhodesian dollar was at parity to the UK pound in 1979, but still they took up arms against the Smith government. Today, starving, living in utter misery, they refuse to help themselves and do the same to the ZanuPF regime.

People get the government they deserve. No sympathy for those who refuse to help themselves.

Yes, because the exchange rate is the basis for a government. honk honk.

Kind of like the government that you deserved, that failed economically and gave your kid’s future to the ANC. You must be so proud. African governments for da africans.

yes, leave Africa for africans they say..

Fully agree. No sympathy at all!

If you honestly believe these elections are fair then I feel very sorry for you. These tyrants have military foundations in their power. The people are powerless. Scores of reports from the previous elections of voter intimidation etc. Wake up

jakarandafm …..A.M show tells its listeners all is hunky dory in RSA

The DJ’s tell us RSA is bliss and negative events are trivial

Tripe …until they play music

True and the comparison and bitter irony is largely ignored by what has to be the most self-centred (stupidest?) voters on the planet. Zim’s woes, richly deserved by the voting majority; sad for the animals and minorities. Ditto in SA, the sheeple keep voting for the most corrupt and self centred elite, effectively screwing themselves, exactly as in Zim. Mostly on the basis of race, as in Zim.

Note that rising unemployment and dissatisfaction with the corrupt Mugabe government triggered Mad Bob’s Hitler Hunzvee and the land invasions. In SA we have EWC and Julius Malema to distract from the rising unemployment and deeply corrupt Eskom, Arms Deal, municipalities, Gupta’s etc, all enriching the current elite. When the courts intervene, change the judges.

Will the outcome be any different in SA? Methinks not. Sadly.

Yep … if it walks like a duck, quacks like a duck and swims like a duck … it will get stolen and eaten by the ANC.

Result of utter incompetence, rampant corruption and stubborn clinging to bygone ideologies.

Like the apartheid government. Like the current SA government. Lots of parallels in Africa.

So the inflation rate under the previous governments in SA and Rhodesia was also 1000%, eh? Another inane and trite comment.

Was right up there. And it resulted in you having to give your kid’s future to the ANC. You must be so proud. Great success. You soiled the bed. Now you have to sleep in it.

EFF take note: Handing out money does NOT solve problems – it creates poverty.

Your fear is not that they want to ‘hand out money’. You are scared that they want to hand out YOUR money.

You do realize that if the SARB were to start printing money, your own money would become worthless pretty quickly? Didn’t think so. Maybe phone a friend next time before making a fool of yourself.

That is a legitimate fear because afterall, I worked hard for many years for “my money” and paid all my taxes. Nothing wrong with the fear that my money will be given to others who didn’t work for it.

Did you figure that out yourself?

Liberation from those pesky evil colonialists is just grand

If you can turn the clock back and let the people vote today for Ian Smith or Uncle Bob. I wonder what the outcome will be.

Bob probably. Misgoverned by your own people over outsiders..

When any democratic government uses its political power to influence the actions of the Reserve Bank, then it is inevitable that the value of the currency will reflect the value of the intellectual capacity of the average voter. This phenomenon is playing itself out in Zim.

There is only one person standing between the value of the rand and that of the Zim currency, and that is the proudly and fiercely independent Governor of the South African Reserve Bank. If it was not for this man, the value of the rand would have been a true representation of the mindset of the average voter. If that fact scares the living daylights out of you, then you are a well-informed realist.

Sad to see a country with so many bright people and a (used to be anyways) good education fail to appoint people who understand that flooding the market with currency will inevitably result in hyper inflation.

the sooner zim hits ground zero the better so azania learns from their mistakes.
what really annoys me is ex zimbos who go back to zim on holiday thereby propping up that corrupt zim with their Rands , let the country vrek

Where is Julius Malema, the man who speaks so glowingly of Mugabe and the Zimbabwe economic model? Economic freedom has been so wonderful for the ordinary Zimbabwean! Why can’t Africa’s esteemed politicians create models that make them super rich and improve the living standards of citizens instead of models that do the first (of course) but turn citizens into paupers.

So it shows that a free tee-shirt and beret will not buy you bread! Hopefully we all in South Africa learn this lesson before it’s too late – like it is in Zim.
It only took 40 years – we’ve gone 25 yrs so far…we have 15 yrs left to change our tune.

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