Zimbabwes economy in the past years and now - Essay Example

Zimbabwe’s economy in the past years and now Introduction During the past few decades Zimbabwe has faced major political and economic problems that have contributed to an almost dual figure negative growth in her economy. These factors have also contributed to enormous rise in inflation, disregard of the rule of law and market breakdown. The country’s GDP has been a victim of decline since 1990. According to the macro-economic figures researched by IMF in 2008, Zimbabwe’s GDP dropped from 7 % in 1990 to negative 6 % in 2007. This negative growth can be attributed to adverse weather conditions which led to a worst decline of negative 10 % GDP growth in 2003 which was a contribution of a major drought that was witnessed in 2003. These figures have however showed an encouraging growth since 2003. Currently, three major problems face Zimbabwe’s economy notably; scarcity of food, less fuel delivery and power load-shedding as a result investors shy away. It is worth noting that the major cause of these problems dates back to the era where the country’s commercial farms were nationalized. Nationalization of commercial farms has seen its effect with a reduced export earnings and low food production. This means the country has to cater for expenses on importation of food and consequently reduced earning in foreign currencies. In addition, foreign banks’ and donors’ withdrawal of financial aid as well as credits has worsened the state of economy in Zimbabwe. In this regard, the IMF and World Bank cannot help Zimbabwe to balance its payments due to the fact that they are opposed to its policies and the huge amounts of debts that remain unpaid. As mentioned earlier, Zimbabwe faces electricity and fuel crisis owing to their huge debts with suppliers of these imports. In the recent years, exporting companies have reported uncertainty as foreign customers evaluate on the possibility of continued supply. Numerous businesses continue to close down due to the fact that importers have already known the dangers signs under economic circumstances where foreign currencies exceed the country’s current earnings. Zimbabwe’s growth has shown indications of recovery after a long time of economic decline between the period 1998 and 2009. “For instance, the country’s economic growths rate between 2010 and 2011 recorded an annual growth 9 %” (Chichewa, p.35). This was followed by a slackened growth of 5 % in 2012. The decline in growth is attributed to low farm produce and diamond revenues. Moreover Zimbabwe’s economic growth is impeded by a number of factors such as: poor infrastructure, indigenization pressure, policies that does not conform to international standards, increased foreign debts and unemployment. It is worth noting that Zimbabwe’s terrestrial reform has been marred with violent reactions by different factions. “These violent reactions have damaged farming sector which is the main economic activity and export earner” (Kramarenko, 12). As a result of these problems, Zimbabwe lost close to 500 000 jobs out of commercial farming. Amid these economic challenges, the Reserve Bank of Zimbabwe in 2009 embarked on routine printing of notes to curb budget shortfalls leading to acute inflation levels. In an effort to overcome the advanced inflation levels, Zimbabwe’s economists introduced dollarization by allowing the use of Botswana’s, South Africa’s and the United States’ currencies to be used in the country. The effort helped restore sanity in the economy that was nearly falling. However, their use led to exposed operational flaws that have continuously subdued an all-round economic growth. It is paramount to study current economic conditions Zimbabwe by looking at isolated sectors that contribute to its economy such as agriculture, industry, advanced inflation and health care. These sectors contribute in one or more ways to the economy and that is why it forms basis of discussion. Agriculture Food sustainability is a vital component of a positively growing economy. This is subject to a country’s ability to utilize the scarce resources within its disposal to maximize production. Zimbabwe’s agricultural sector has the ability to produce sufficient amount of food to feed its entire population and still remain with sufficient surplus for export. However, this has not been the case for the last two decades. “A report from the world health organization indicates that as a result of progressive failing agricultural sector, about half of Zimbabwe’s population starves to death” (Dash wood, p.65). Before the year 2000 agriculture was Zimbabwe’s major contributor to economy though there were stringent disparities in land value that was preserved for the white farmers as to the preserve of their black counterparts. In fact majority of the fertile arable farm was occupied by the Britons whereas the arid and the semi-arid parts of the country were mainly occupied by the natives. Zimbabweans were aggrieved by this socioeconomic disparity pressurizing the government to send away the white farmers. As a result, the Land Acquisition Act was drafted. The Act proposed the eviction of white farmers and redistribution of land to the black farmers. This Act received worldwide acceptance as this was perceived to be an essential contributor not only to the economy but also to harmony and stability. However, the land reform did not receive enough funding to fairly compensate the property of every white farmer who was evicted causing delays in its implementation. As pressure ensued from the public, the government in 2001 amended the Land Acquisition Act to allow immediate eviction of the whites. This amendment received a wide outcry from the white farmers. A strong opposition to implementation of the Act by the white farmers became eminent. As a result of this opposition to eviction, the blacks forced their way causing intrusion into the whites’ farms. This resulted in countrywide violence that led to the killing of a dozen whites. Mugabe’s Land Acquisition Act faced another problem after the eviction of the Britons as it was unable to allocate the productive arable farm to skilled farmers who will match the production level of the white farmers. This caused a drop in production of food resulting in acute food shortage that has continued to cripple its economy. Hyperinflation There has been a rapid decline in the value of Zimbabwe’s currency in the last two decades. The country has recorded an appalling inflation rate of over 240 million Per cent. This inflation rate means that the price of goods doubles every day. This has forced Zimbabwe’s government to print more currency further crippling the country’s economic growth. In the recent years, Investors have continued to shy away owing to the fact that the local currency has failed to serve local business. “Businesses instead prefer the use of foreign currencies as the ailing Zimbabwe’s currency cannot predict the real value of stock in the market” ” (Peel and Ranger, p. 251). It is quite interesting to note that the economy of Zimbabwe has almost reached a state of collapse as the government has opted to pay its workers in foreign currencies. This is a negative indicator of a failed economy. Health conditions As mentioned earlier, the government of Zimbabwe has been unable to produce enough revenue that will fund its entire infrastructures due the broken economy. This has been evidenced in the health sector where despite the high birth rate, the sector still records negative population growth. The negative growth is attributed to high infant mortality rates. This places Zimbabwe among the 15 top countries in the world with the highest death rates due to poor. “In addition, close to 25% of the country’s total population is infected with HIV/AIDS this population die each year due to the government’s failure to provide free retroviral drugs” (Dansereau et al. p. 14) Generally, the entire workforce cannot adequately produce as expected due to the poor economy. Conclusion Currently donor countries have withheld financial funding for Zimbabwe amid its financial crisis. If fact, the United States of America and Britain who were major donors have so far withdrawn financial aids unless proper economic and political reforms are fixed. Works cited. Chichewa, Jacob W. A Crisis of Governance: Zimbabwe. New York: Agora Pub, 2004. Print. Dansereau, Suzanne, Mario Zamboni, and Henning Melba, Zimbabwe - the Political Economy of Decline; Uppsala: Nordic Africa Institute (Nordiska Africa institute, 2005. Print. Dash wood, Heine S. Zimbabwe: The Political Economy of Transformation. Toronto: Univ. of Toronto Press, 2000. Print. Kramarenko, V. Zimbabwe: Challenges and Policy Options after Hyperinflation. Washington, D.C.: International Monetary Fund, 2010. Internet resource Peel, J D. Y, and T O. Ranger. Past and Present in Zimbabwe; Manchester [Greater Manchester: Manchester University Press, 1982. Print. Read More