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Zimbabwe: Current Issues - page 15 / 19

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15 / 19

IB10059

10-17-01

and the August

price of bread had more than doubled since

9,

2001).

Inflation,

combined

with

high

January interest

(Financial Times, London, rates, inhibits investment.

Disbursements of World Bank loans have been suspended repayments are overdue, and IMF lending is also suspended, Zimbabwe’s economic policies.

in part because Zimbabwe’s reflecting IMF concerns over

Foreign exchange is in very short supply, and because of this Zimbabwe suffers a severe shortage of fuels, which must be imported. On June 13, 2001, the government raised fuel prices by 70%, leading to two days of protests over resulting increases in the prices of basic commodities and of bus and taxi fares. The shortage of hard currency seems certain to continue, since the output of tobacco, the principal foreign exchange earner, is dropping due to the crisis on the farms. Tourism, an important source of revenue, has plummeted as images of conflict and confrontation in Zimbabwe have been broadcast around the world. Food shortages are now feared, because many of the farms taken over by squatters were growing produce and maize, the staple of the Zimbabwe diet, for local consumption. (Zimbabwe officials maintain, however, that maize output will increase as a result of land redistribution.) In July 2001, the government banned private sales of maize and wheat, re-instituting the maize trade monopoly of the government-owned Grain Marketing Board. Some economists fear that this move will further reduce incentives to producers and could create a parallel market where grain would be sold illicitly at high prices.

The Confederation of Zimbabwe Industries estimates that 400 businesses closed in2000, with the loss of 10,000 jobs. President Mugabe blames the closures on a campaign by local whites to damage the economy in protest to the land takeovers. (BBC, April 18, 2001.) Actual attacks on businesses by militants and war veterans, which broke out in April 2001, appear to have subsided. Analysts typically blame the economic policies of the Mugabe government, and its failure to carry through with the reforms promised in 1991, for Zimbabwe’s economic difficulties. High government spending, such as the 70% to 90% pay raises Mugabe granted civil servants and the military on the eve of the February constitutional referendum (Financial Times, London, January 20, 2000) comes in for particular criticism. State-owned corporations, such as the national oil company and the national electricity supplier, typically operate at losses, and this adds to the budget deficit. President Mugabe, on the other hand, blames donor-imposed economic reform programs for the country’s economic difficulties, arguing that they deprived the government of the ability to influence the economy and mainlybenefitted external interests together with local white-owned companies. (Speech to the Special People’s Congress, December 14, 2000.)

Libyan leader Muamar al-Qadhafi is offering support to Zimbabwe’s economy through a $360 million oil deal, which will reportedly see Libyan oil going to Zimbabwe in exchange for Zimbabwe exports to Libya. Qadhafi gave $100 million in aid to Zimbabwe in 2000. (Reuters report appearing in Daily Mail and Guardian, South Africa, July 19, 2001.) According to some press reports, President Qadhafi is seeking a stake in key sectors of the Zimbabwe economy, including agriculture and tourism, in exchange for his support.

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