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Zimbabwe’s ripple effect

Though not posing a threat to SA’s financial system stability, a total collapse in Zimbabwe could have wider political, economic and social consequences for the region, the South African Reserve Bank (SARB) has cautioned.
In its latest Financial Stability Review, t

he SARB said the economic and political difficulties in Zimbabwe seemed to be deepening.
It said a recent International Monetary Fund Article IV Mission had indicated that real production in SA’s neighbouring state was likely to decline by a further 7% this year.
Foreign currency reserves, it said, were down to three days’ worth of imports with forex shortages restricting essential imports needed for industrial and agricultural production, fuel, energy and basic commodities, further exacerbating the decline of the formal economy and the government’s revenue base.
Zimbabwe’s headline inflation rate increased to 265.1% year on year in August 2005 from 254.8% in July. The country’s budget deficit was estimated to exceed 14% of GDP, while unemployment was currently estimated at 75%, with over
70% of the population living under the poverty line.
“Food shortages, exacerbated by drought affecting the entire sub-region, have been an additional challenge, particularly in the rural areas. According to a United Nations’ Report of the Fact-Finding Mission to Zimbabwe to assess the Scope and Impact of Operation Murambatsvina, the widely condemned government initiative ‘Operation Restore Order’ has led to an estimated 700,000 people in cities across the country either losing their homes or their livelihoods or both. The operation has had a major economic, social, political and institutional impact on Zimbabwean society and its effects will be felt for many years to come,” the SARB said. — I-Net Bridge

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