Zimbabwe dollars rejected as currency crashes

By Tererai Karimakwenda
June 22, 2007

(It’s official! The Zimbabwe dollar has replaced the Zambian Kwacha as the subject of jokes among Africans.)
We have received reports that foreign currency dealers in Zimbabwe are scrambling for bidders after the informal rates more than doubled on Thursday causing the economy to virtually crash. The US dollar was reportedly fetching as much as Z$400,000 and shops closed early to change prices on products. Very few petrol stations had fuel and many were rejecting the local currency. A litre of petrol is selling at Z$150,000 and prices are changing while people wait in long queues. Dealers say this is the worst it has ever been. And headlines around the world are using words like “crash” “madness” and “plummets.”
Other reports we received said some food shops were also not accepting the Zimbabwe dollar. Official figures released last week said inflation was 4500%. But financial experts say it is at least 9000% and probably more.

Recent predictions that the economy would collapse within six months may be optimistic since life on the ground clearly shows that already things are hardly functioning. Minibus operators raised fares again by 50% this week, after they went up last week. Civil servants such as teachers and nurses are failing to report to work, as they have no money for transport. Many security guards are also failing to pitch up for work as are many other employees. There are wildcat strikes everywhere as workers fail to make ends meet. Power and water cuts have drastically affected businesses and created health hazards for institutions that cannot flush their toilets.

Politically this spells trouble for Robert Mugabe and the ruling elite. Tim Hughes, a research fellow at the South African Institute of International Affairs, believes we may be entering a phase in which the economic implosion in Zimbabwe will have the type of political implications that the opposition has never achieved. He said it may well be the final straw and lead to political change. Hughes explained that South Africa is acutely aware of this. He added: “Certainly since the SADC mandate from March this year, the whole of the SADC community is aware of the economic, social and humanitarian imperatives of finding a resolution to the Zimbabwe crisis.”

Meanwhile, prices of basic commodities are due to increase again on Monday. The Crisis Coalition in Zimbabwe published their “Weekly Economic Bulletin” Friday, based on information from the Confederation of Zimbabwe Industries (CZI). It said the price for a loaf of bread will increase from the current Z$25,000 per loaf to between Z$35,000 and Z$45,000. Local commuter fares will go up from Z$35,000 to Z$50,000 per trip.

We asked Hughes what he thought Mugabe will do, faced with this unsustainable situation. He said: “I have no doubt that Mugabe’s preferred option is to remain president for life, to nationalise whatever assets are left in the economy, that is to say minerals etc, and to use the proceeds from that to support his inner sanctum.”

No one can accurately predict the future, but what is certain is that Zimbabweans are suffering and there seem to be no solution in sight, unless there is political change.