SINCE the economic liberalisation initiated by central bank governor Gideon Gono, which commenced in earnest on February 28, Zimbabwe has experienced an economic mini-boom. But that boom is now over – for two reasons:
* The official exchange rate has, through the forex auction system, depreciated at only 200% per annum over the last five months while the official inflation rate has been 400% (and the actual inflation rate possibly higher).
No surprise then that the parallel market rate is now diverging from the official rate ($6 800 vs $5 350), and that the parallel market shows a 370% annual depreciation rate – almost exactly mirroring inflation.
Unless the official rate is kept close to reality, the recent economic miracle will unravel rapidly.
* Pre-election business paralysis is now on us – almost all investment will now be deferred until after the election. This is not abnormal in many countries, but the situation is greatly worsened by the following:
* President Mugabe shows fewer and fewer signs of retiring or being retired;
* President Mugabe has announced an open season on MDC politicians and supporters, and on ordinary voters (who would and probably will vote for the MDC in droves if not harassed, starved, coerced, intimidated, beaten, tortured, killed, and disappeared).
There are three scenarios for the election:
* President Mugabe is retained – a catastrophe for business, the economy, and all classes of society, including the rich and Zanu PF;
* Zanu PF is retained without Mugabe – a middle course; and
* MDC is voted in – a very positive outcome for business, the economy, and all classes of society.
The course of events is very largely but not totally in the hands of the IMF and the international community.
But the IMF and the international community must not underestimate the damage to the economy which can result over the next eight months as a joint result of pre-election paralysis and the antics of a selfish and vindictive president.