THE economic prospects for Zimbabwe are “grim”, the International Monetary Fund said last weekend, after data from the Central Statistical Office showed annual inflation rose to a record high above 1 200% in August.
The IMF said
inflation would average 4 279% in 2007 if the government did not change its current policies. Zimbabwe’s economy is in its eighth year of recession and the IMF said it expected the economy to shrink by 5,1% this year, after contracting by 6,5% in 2005.
The country’s central bank, however, believes the economy will grow by 0,3 to 0,6% this year and that inflation will be in single digits by 2008.
Siddharth Tiwari, deputy director in the IMF’s Africa Department, said there were no bounds on how high inflation could rise and that any changes would depend on corrective policies.
“The country is in a difficult situation and has faced six years of continuous output decline, rising prices, increasing poverty and a decrease in public services … it’s a tragic situation, frankly, and the prospects are grim,” Tiwari told a news conference to discuss the economic outlook for Africa.
Official figures last Friday said annual inflation rose to 1 204,6% compared to 993,6% in the year to July, the highest in the world.
The government has blamed the country’s six-year recession on sanctions and drought but critics blame it on economic mismanagement.
Tiwari said a foreign financing package for Zimbabwe reported by the media earlier this week would help, but he stressed that without proper policies, the country would not recover.
The government last week unveiled a package of foreign loans worth US$490 million, including a US$200 million facility from China, to help ease shortages of foreign currency, fuel and food, and unemployment above 70%.
Most of the loans will be directed at the agricultural sector, which has been hardest hit by a drought and President Mugabe’s backing for the seizure of white-owned commercial farms.
The Chinese loan is the first major foreign loan issue to the country since Western donors withdrew after the land seizures.
“There is substantial goodwill on the part of the international community to help Zimbabwe, but the first step has to be taken by the authorities,” Tiwari said. — Reuters/Staff Writer.