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Zimbabwe reaches ‘tipping point’ as inflation blacked out

Economic crisis in the African state is rapidly worsening.
While the cost of basic services has climbed 400% this year, pay rises have been around 10%. Picture: Reuters

Zimbabwe’s finance minister responded to the country’s worsening economic crisis last week by blacking out inflation statistics for the next six months, boosting the price of the little power that’s available five-fold and admitting what the International Monetary Fund told him in April: the economy will contact for the first time since 2008.

At the same time he spoke of fiscal surpluses and a relaxation in local ownership requirements for the key platinum industry. This all happened in a country with daily power cuts of up to 18 hours and shortages of everything from bread to motor fuel. People are receiving food aid in cities for the first time and a drought has necessitated the import of hundreds of thousands of tons of corn.

Read: Power crisis turns night into day for Zimbabwe’s firms and families

When Robert Mugabe was ousted after four decades in power in late 2017 his replacement, Emmerson Mnangagwa, promised economic regeneration and declared that Zimbabwe is “open for business.” Instead things have gone from bad to worse with the effects of rapidly expanding money supply through the sale of Treasury bills under Mugabe’s rule coming home to roost and this year’s outlawing of the US dollar in favour of a local quasi currency that can’t be traded outside the country causing panic.

“Zimbabwe is at a tipping point and if it falls over the edge it’s going to be quite a long way in coming back,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. “The wheels are falling off. There is no way out of a Ponzi scheme other than a massive infusion of cash to pay off your creditors.”

The country with the world’s highest inflation rate after Venezuela also suspended annual consumer-price data for the next six months. The authorities need to collect comparable data since the introduction of the new currency in February. That marked a return to 2009, when the country abandoned the Zimbabwe dollar in favour of the US dollar and other currencies after inflation surged to an estimated 500 billion percent.

If the more commonly used black-market exchange rate is used, Zimbabwe’s annual inflation is currently 558%, about three times the official rate, while Venezuela’s is 35 004%, according to Steve H. Hanke, a professor of applied economics at the John Hopkins University in Baltimore.

Scrapping the official annual rate is “no real loss from an analytical perspective,” said Jee-A van der Linde, an economist at NKC African Economics in Paarl, South Africa. “These elevated inflation readings did little more than create panic and damage what little confidence was left.”

Still, the decision evokes other countries in crisis. Venezuela halted publication of inflation data and while it periodically releases figures, it isn’t operating on a regular schedule. In 2013, Argentina was censured by the IMF for tampering with its data.

A de-linking of the country’s quasi-currencies from parity with the US dollar in February and the re-imposition of the Zimbabwe dollar overnight in June has fueled depreciation with the currency officially trading at 9.28 to the dollar on Aug. 2. The black-market rate was 10.8, according to, a website run by analysts. While the government has argued that in the face of foreign-currency shortages it has no choice but to reintroduce its own currency, Hanke disagrees.

“The Achilles heel is the introduction of the new currency to the exclusion of the dollar,” he said. “They have decided to go in the completely opposite direction and claimed it’s the best thing since sliced bread and it’s going to be an absolute disaster.”

While the cost of basic services has climbed 400% this year, pay rises have been around 10%, said Japhet Moyo, secretary-general of the Zimbabwe Congress of Trade Unions, which has 130 000 members.

Finance minister Mthuli Ncube tried to highlight the country’s first positive current-account balance in a decade as a sign of progress. Since his appointment last year, the government has sold only marginal amounts of Treasury bills. And earlier this year, the Cambridge University-trained economics professor forecast that month-on-month inflation, which surged to 39.3% in June, would be close to zero by year-end.

The fundamental problem is that the government has failed to attract significant investment and hasn’t substantially changed the policies of the Mugabe era, said John Robertson, an independent economist in Harare, the capital.

“People are very angry” and even though a quarter of the population has already emigrated, more may follow, said Matyszak.

“The Zimbabwe I once loved has become a cemetery for my son’s future” said Ashley Randen, an unemployed single mother of a 12-year-old boy in Harare.

© 2019 Bloomberg L.P.

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It was supposed to be so easy: Take from the “haves” and give to the “don’t haves”. What could go wrong? Everybody is a farmer. Except that, nobody asked the obvious question: Why don’t they have?

But they have land, don’t they? The took all the white-owned land, didn’t they? They should be living in a paradise, not true? We all “know” land=wealth…..don’t we?

Even better Julius said if you have land you do not need a job and you will have food.

So whats the problem Zim????

clueless on how to run a country.

Not really Sam; it is just that they have never tried. Their “jobs” are venal self interest, stealing from all the people while spouting racist rhetoric. Same as the ANC.

It is obvious that Zimbabwe is a failed state. Go to the Netherlands and ask them to run it for 10 years. I would have suggested to go to a well run African country to ask for help but for the life of me I cannot think of one. Ask the Dutch to do it for you. They are plenty savvy people. Look hom well Gonarezhou game reserve is doing since the Frankfurt zoo stepped in. And before I get pilloried, I don’t have a racist hair on my head but now is the time to think outside the box. There, solved the problem.

Unless we have a political miracle this is what awaits South Africa.

The whole country has been “blacked” out….predictably.

Take note anc and eff, this is the economic and societal success story “you people” admire and continue bindly to drive South Africa down the same pit toilet of your racist, negroid, thuggery, Indolence and misplaced
“superiority” and knowitall stalinist BS.

politicians just do what the electorate ask them to do. I’m less concerned about the anc and eff as I am on what the average SA voter represents.

But they are equal. Why not appoint White Government Ministers. I forgot. They are equal.

Looting a shop is easier than queing to pay

African mentality, be it politics or civil shows the same mentality

Is anyone actually surprised at this?

The same government/mentality is still in power and it will have the same outcome as last time.

… but they are “free”

Fully decolonized, well done!

End of comments.





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