Monday, July 10, 2017

Zimbabwe Economy

On 18 April 1980, the Republic of Zimbabwe was born from the former British colony of Southern Rhodesia. The Rhodesian Dollar was replaced by the Zimbabwe dollar at par value. When Zimbabwe gained independence, the Zimbabwean dollar was more valuable than the US dollar at the official exchange rates, however, this value did not reflect reality, and its black market value was lower. In its early years, Zimbabwe experienced strong growth and development. Wheat production for non-drought years was proportionally higher than in the past. The tobacco industry was thriving as well. Economic indicators for the country were strong.
From 1991 to 1996, the Zimbabwean Zanu-PF government of president Robert Mugabe embarked on an Economic Structural Adjustment Programme (ESAP), designed by the IMF and the World Bank, that had serious negative effects on Zimbabwe's economy.
In the late 1990s, the government instituted land reforms intended to evict white landowners and place their holdings in the hands of black farmers. However, many of these "farmers" had no experience or training in farming. 
From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%. Life expectancy dropped.

https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

 

Zimbabwe's economy depends heavily on its mining and agriculture sectors. Following a decade of contraction from 1998 to 2008, the economy recorded real growth of more than 10% per year in the period 2010-13, before slowing to roughly 3% in 2014 due to poor harvests, low diamond revenues, and decreased investment.

 

Lower mineral prices, infrastructure and regulatory deficiencies, a poor investment climate, a large public and external debt burden, and extremely high government wage expenses impede the country’s economic performance. Until early 2009, the Reserve Bank of Zimbabwe (RBZ) routinely printed money to fund the budget deficit, causing hyperinflation.

 

Dollarization in early 2009 - which allowed currencies such as the Botswana pula, the South Africa rand, and the US dollar to be used locally - ended hyperinflation and reduced inflation below 10% per year. The RBZ introduced bond coins denominated in 1, 5, 10, and 25 cent increments on a par with the US dollar in December 2014, more than five years after the Zimbabwe dollar was taken out of circulation.

 

In January 2015, as part of the government’s effort to boost trade and attract foreign investment, the RBZ announced that the Chinese renmimbi, Indian rupee, Australian dollar, and Japanese yen would be accepted as legal tender in Zimbabwe.

 

Zimbabwe’s government entered a second Staff Monitored Program with the IMF in 2014 and undertook other measures to reengage with international financial institutions. Foreign and domestic investment continues to be hindered by the lack of clarity regarding the government’s Indigenization and Economic Empowerment Act. In 2015 the depreciation of the South African rand against the US dollar has led to deflation in Zimbabwe as prices for South African imports decline while the costs of domestic production in US dollars remains stable.

 

http://www.theodora.com/wfbcurrent/zimbabwe/zimbabwe_economy.html


Comments

Most former colonies have had problems adjusting to the end of “colonialism”. It creates a void and selecting leaders is a “crap shoot”. Communists were quick to take over African countries and were elected promising “free stuff”. This never works out well.  Muslim terror groups have also infiltrated African countries and are struggling to exist.

The correct answer for new African governments is to expand property rights and economic freedom and adhere to the rule of law and not overspend their tax dollars.


Norb Leahy, Dunwoody GA Tea Party Leader

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