World

Zimbabwe: Economic Crisis Continues

by babblingdweeb | July 16, 2007 at 11:23 am

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Weeks ago it was reported that Zimbabwe's record inflation would continue to spiral out of control; going from 3,714% to 512,000$ by the end of 2007. Today it is being reported at 20,000%** and the black market is picking up chunks of the economy where it can.

In a confusing situation, goods are flying off the shelves as consumers can't help the government forced price slashing.

Zimbabweans are shopping like there's no tomorrow. With police patrolling the aisles of Harare's electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as £20. Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world's fastest shrinking economy gorged itself on one last spending spree.

Car dealers said officials were trying to force them to sell vehicles at the official exchange rate, effectively meaning that a car costing £15,000 could be had for £30 by changing money on the blackmarket. The owners of several dealerships have been arrested.

On one hand the President Robert Mugabe is trying to halt development in the mining industry while attempting to place blame on businesses for fueling inflation -not accepting his own mismanagement of the country.

Basic economics shows that forced price cuts, below world price (and below the store owner cost), will either not generate a profit, nor allow local stores to remain competitive against imports -or both. This scenario can push local stores out of business and leave the country in short supply of other goods Zimbabwe needs. This scenario is something President Mugabe is ignoring, calling it "bookish economics". [Guardian]

The impact of the price cuts was felt almost immediately as fuel virtually disappeared from sale after garages were forced to sell petrol for 23p a litre, less than they paid the state-owned supplier.

The police and army broke the locks on petrol pumps at some garages and tanks ran dry amid panic buying. Now petrol is available only on the blackmarket, at more than seven times the official price and three times what garages had been charging. By Saturday, most minibus taxis had gone from the roads because drivers could not find petrol. Crowds of workers were left on kerbs for hours trying to get to or from their jobs.

** Inflation rates in the news have been inconsistent as of late.

Moscow Times: "Official inflation is running at 4,500 percent, the highest in the
world, though independent financial institutions estimate real
inflation is closer to 9,000 percent." [July 16, 2007]
Guardian Unlimited: "...inflation, running at about 20,000%..." [July 16, 2007]
Zimbabwe Situation: "Official inflation is now 4 500%, although analysts say it is double that." [July 13, 2007]

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Jordan Yerman

flagged this story as Good Stuff

at 15:15 on July 16th, 2007

Well done, mate. I may have mentioned this in an earlier post, but it's likely that Mugabe's actual power will only last as long as he can pay his troops in any meaningful way: if the army/police have to seal, too, then there's no real payoff in loyalty to Mugabe.

babblingdweeb

at 11:12 on July 18th, 2007

Good point! It would be hard to maintain troop control if you can't pay them. However, I think Mugabe would just start taking from everyone else and giving to himself, along with his troops -before he let his troops go without. Granted, even that won't last for long!