Economist warns Zimbabwe dollar almost wiped out in value

By Violet Gonda
23 March 2006

Analysts have warned of worse things to come if disastrous policies being implemented by the government are not changed. Economist John Robertson said the economy is in very bad shape mainly because of the rapid level of inflation. But he added, “Inflation itself is only a symptom of other bigger problems such as scarcity of goods and scarcity of foreign currency, caused by the reduced volumes of exports.”

Observers have said the economy has to be the government’s biggest embarrassment but it constantly has to justify what it has done by claiming that the policies have been in the interest of the population. The economists said, “The government’s only looking backwards to explain what it has done and it has not provided any forward looking plans.”

He said the effects of this disabled economy should be a source of massive embarrassment for the Mugabe regime, which cannot raise the money it needs from taxes or from loans. Lending institutions no longer have the savings that the government requires to close the gap between revenue and expenditure.

The ruling party claims inflation is 780%. Robertson said the government figures are not too far off but if nothing is done to address the problems it could go up to a figure that is well above 1 000% in the coming months.

The analyst said the inflationary rate for February was very high if we are to measure from month to month; “Prices on average were 27% higher than they were in January. That is a level of inflation that many developed countries would not experience in even 10 years and we had it in one month.”

The extent to which prices are changing has resulted in people paying millions of dollars to buy ordinary goods. In her weekly email update author Cathy Buckle said a simple shopping trip to a supermarket has become an exhausting and depressing event. She wrote; “As I stood waiting for my turn I looked at the prices of things and it is like being in cuckoo land. A 500 gram packet of "value" bacon costs more than I paid for my entire house just five years ago! A single egg now costs twenty five thousand dollars and a friend told me that he had bought his two thousand acre farm a few years ago for the price of two eggs and half an egg shell!”

John Robertson said the biggest note Zimbabwe has at the moment is Z$50 000 which works out at 50 American cents at the official exchange. “That means with one Z$50 000 notes I could have bought 2 houses when I bought my house back in the 70s for Z$25 000.”

Critics have said the answer to this problem has to be the establishment of a democratic government.