Economic Decline To Persist

WITH inflation at 4% it takes 18 years for a currency to lose half of its value, using the rule 72 recommended by the International Monetary Fund.

 

At 100 000% it takes about nine hours and 20 minutes for $100 to lose half its value.

And with inflation at 9 030 000%, if you delay your shopping by half an hour you have effectively lost 50% of the value of your money.

This means if one goes out to buy a loaf of bread and is 10 cents short, by the time they rush home to collect the 10 cents and return to the shop, the price of bread will probably have doubled.

The country’s long and uninterrupted period of economic decline is set to persist following President Robert Mugabe’s victory during the presidential election run-off last week.

Over the past 10 years the economy has been cruising in reverse gear courtesy of skewed economic and political policies.

Analysts this week said economic decline would continue to persist as the same policies that had been pursued by Zanu PF over the past 10 years would be maintained.

Zimbabwe’s currency is now worthless from hyperinflation, its financial institutions in total disarray while its world-class farming estates lie idle and tourism infrastructure is grossly underutilised.

Zimbabwe, the spirit of whose citizens has been shackled by shortsighted economic policies, has for long been riding on the highway to total disaster.

In Zimbabwe, most streets are paved with discarded Zimbabwean bearer cheques, and nobody is bothering to pick them up.

With an inflation rate nearing 10 million% and financial chaos at both government and street level, the local currency has become a conundrum, even a joke, to many Zimbabweans. About 80% of the population is estimated to be unemployed and living below the poverty line, according to figures from the Zimbabwe Congress of Trade Unions.

Jacob Chifadze, a young professional in Harare, has resorted to doing extra jobs after his formal employment to supplement his employer’s salary which barely lasts a week.

“I wake up with no idea what anything will cost. The commuter omnibus driver is also in the dark. All we can agree is that my trip to work will cost more,” he said.

Mugabe (84) continues to launch verbal attacks on the West, particularly Britain. He blames sanctions for his country’s economic and social collapse. The sanctions, imposed by Western powers after widespread malpractices in the 2002 presidential poll, specifically target Mugabe and members of his inner circle and have a negligible influence on the economy, opposition groups claim.

Shops and supermarkets witness scenes of shoppers running to grab products from shelves ahead of supermarket staff hurrying to attach the new day’s price tags.

Supermarket tills, cash machines and wallets fail to accommodate the large number of bills now needed to purchase basic commodities.

The International Monetary Fund has declared the situation in Zimbabwe an economic crisis.

“The economic crisis calls for urgent implementation of a comprehensive policy package comprising several mutually reinforcing actions,” the IMF said in its 2007 recommendations for redressing Zimbabwe’s economy.

The reforms include structural reforms, public enterprise and civil service reform, agricultural sector reforms and the strengthening of private property rights.

Zimbabwe last month introduced a new half-a-billion dollar bank note in a bid to tackle cash shortages being fed by rampant inflation. The parlous situation is aggravated by President Mugabe’s fight against the laws of supply and demand, and recommendations by the IMF.

Mugabe has been threatening to imprison shopkeepers who increase commodity prices. Inability to adjust commodity prices to reflect costs is tantamount to forcing shops to close, forcing them out of business and rendering supply even more incapable of meeting demand.

Economist John Robertson says while President Mugabe has been printing new currency at increasingly rapid rates to help pay government costs, such production has only served to hasten the decline of the value of the Zimbabwe dollar, while driving up commodity costs and inflation.

“They’re printing money so fast but it is getting to the point that it is not fast enough,” Robertson said.

“The crunch is going to come when local money is eroded to the point it is no longer acceptable in commercial activities or as earnings,” said Robertson.

Already, many ordinary transactions are being conducted in US dollars, both openly and in secret. Even cultural traditions have not been spared the ravages of hyperinflation. Payment of lobola (marriage dowry) is increasingly now being demanded and tendered in foreign currency.

By Paul Nyakazeya