Economic crisis: Govt’s downfall

ZIMBABWE, currently reeling from financial implosion, has passed through peaks and rock-bottoms of economic performance since the dawn of Independence in 1980. ‘

Source: Economic crisis: Govt’s downfall – The Zimbabwe Independent July 8, 2016

Zimbabwe Independent Comment

President Robert Mugabe inherited an economy which, although under blanket United Nations sanctions and was an isolated backwater, was the most industrialised and thus the strongest in sub-Saharan African outside South Africa.

It had a solid industrial and infrastructural base, with a modernised agricultural sector as its mainstay. Its currency was stronger than the United States dollar and macro-economic stability was solid.

Because of its strong foundation, Zimbabwe’s economy enjoyed brisk recovery after the war. Cumulative real growth from 1980 to 1981 exceeded 20%. However, due to global commodity prices and drought growth sharply dropped 1982, 1983, and 1984.

In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. Although it slumped between 1986 and 1987 because of drought and a foreign exchange crisis, Zimbabwe’s GDP grew on average by about 4,5% in the first decade of independence.

Everything appeared good. The standards of living improved. Goods were relatively cheaper and readily available. Life was decent and promising. The nation’s infrastructure was solidly intact and working well. Things were looking up; the situation was positive.

However, due to government’s command economics and rudimentary socialist thinking authorities were profligate.

Redistribution policies were recklessly implemented and quietly woven into the fabric of society. Mugabe’s policies slowly decreased productivity while increasing dependency on welfare programmes. Reckless expenditures and resultant unsustainable budget deficits were recorded.

Facing inevitable serious financial problems and pressure, government turned to the International Monetary Fund (IMF) and adopted the Economic Structural Adjustment Programmes (Esap) in 1991.

But by 1995 Esap had failed for different reasons. Reeling from growing economic problems and social pressure, Mugabe went the populist route. In 1997 he paid huge unbudgeted for sums to compensate war veterans for their involvement in the armed struggle. The local currency crashed. The Congo War in 1998 further drained the fiscus.

Chaotic land seizures came in 2000 and the country descended into chaos and shifted onto a slippery slope. Collapse began after the dramatic events. Government resorted to violent repression and electoral theft. Sanctions followed.

Price controls also came. Naturally, shortages and bankruptcies became widespread. Hyperinflation and an economic meltdown set in.

After exchange rate stabilisation in 2009 due to the multicurrency system, there was another rebound which ended in 2013. Since then the economy has been on a nose-dive. Now massive company closures, job losses, unemployment, cash shortages, poverty and suffering abound. The populace is inevitably restless and is demanding urgent solutions and change, but government is unable or willing to tackle the crisis. This is fuelling agitation and ongoing protests.

However, Mugabe’s government is clueless and at sea. It is grappling with symptoms, not root causes of the problem and hence the economy will certainly be its eventual downfall.