Zimbabwe faces economic collapse by year end

By Violet Gonda
14 June 2006

An international aid agency has issued a sharp warning that Zimbabwe faces total economic collapse in just six months. This is not the first time that reports of an economic collapse have been made but the Zimbabwe dollar has been falling at an unprecedented rate. Prices of basic commodities are changing every day and most people are failing to go to work because they can’t afford transport costs. More and more companies are closing down, while doctors say the health service isn’t facing collapse – it has collapsed. Increasingly long power and water cuts have also become a way of life.

An internal memorandum circulated to foreign aid groups and non-government organizations by the Heads of Agencies Contact Group said if it carries on at this pace Zimbabwe will collapse completely. It said those who could afford it were already stockpiling durable foods in anticipation of worsening shortages. The group also warned that the Zimbabwe currency would soon become unusable, if inflation continued its upward trend.

Journalist Jan Raath said the consultants estimated that if inflation continued accelerating at today’s rate it could reach 500 000% by the end of the year. He said: “They cited things like the agencies were already paying the local staff on a weekly basis and before long they are going to have to pay them on a daily basis.”
The news comes just days after the Consumer Council of Zimbabwe announced that the cost of living skyrocketed 65% in two months. At present the majority of workers earn an average of Z$500 000 a month but the CCZ said an average family of six now needed Z$5,5 million a month to pay for basic goods and services.
It is feared that if Zimbabwe continues with this downward trend this could trigger civil unrest, which may force the regime to introduce a state of emergency.

But while critics say the economy has become Mugabe’s biggest opposition there are reports which suggest he could be “rescued” by his African counterparts who fear regional instability.
The Institute for War & Peace Reporting (IWPR) says that Mugabe doesn’t want political mediation from SADC. He wants an economic lifeboat. They quote diplomatic sources who said this week that SADC had, or was in the process of mobilizing, a three billion US dollar rescue package for Zimbabwe. SADC’s executive secretary, Tomaz Augusto Salamao was setting up a secretariat to administer the fund.
This is a parallel process to the Thabo Mbeki led initiative looking at a political solution to the crisis.
It remains to be seen if Mugabe’s regional counterparts are going to throw him such an expensive lifeline.