Zim collapse accelerating - IMF
2007-03-18 19:43
Special Report
Zimbabwe’s PM Morgan Tsvangirai has called for openness in the country’s nascent diamond trade, getting underway after the lifting of a global ban over rights abuses.
A dusty road leads to the village of Wedza, where veterans of Zimbabwe's liberation war eke out a meagre living on their farm cooperative, which after a promising start now brings only despair.
Cape Town - Zimbabwe's economic collapse is likely to accelerate with inflation topping 5 000% by year-end as President Robert Mugabe's government loses control of a crisis already rippling across Africa, a senior IMF official said on Sunday.
International Monetary Fund Africa director Abdoulaye Bio-Tchane said Zimbabwe's government had shown little sign of coming to grips with its mounting economic problems, promising more hardships amid sharply rising political tensions.
"It depends on how much the people in the country can take," Bio-Tchane told Reuters in an interview.
"The question is how far it could fall. The last four years we've seen GDP falling by more than 35%. Inflation is running at more than 1 700% and our estimate is by the year's end it could move even beyond 5 000%."
Bio-Tchane's forecast came as Mugabe's government comes under rising international condemnation over a violent crackdown on the opposition this week.
One step forward, two steps back
In response, the United States and other nations threatened to tighten sanctions against Mugabe and other senior Zimbabwean officials.
Mugabe, 83, has warned against any "monkey games" by those he called the stooges of his Western critics and said police would now be well armed to deal with violence caused by the main opposition Movement for Democratic Change (MDC).
Bio-Tchane said Mugabe and Zimbabwe Central Bank Governor Gideon Gono appeared unable to stem the economic slide, which has turned one of Africa's most promising economies into a basket case beset by frequent shortages of food, fuel and foreign exchange.
"It is one step forward, two steps back," he said, saying Gono was fuelling the crisis by expanding the already enormous fiscal deficit to some 40% of GDP this year, printing floods of new cash and subsidising struggling state-run firms.
"They need to rein this in," he said. "But obviously they need more than that. You can't let the economy function if people are not free to operate, if their rights are not secured, including human rights.
Holding Africa back
"You will always find a few people who will benefit from this system, so therefore it may continue. I can't give a date when the whole thing will stop or collapse. But it will certainly continue falling. This will continue impoverishing people, people will continue losing their jobs, continue losing their purchasing power."
Bio-Tchane said Zimbabwe's woes were already felt across Africa as millions of economic refugees stream out of the country, mostly to neighbouring South Africa, while economic growth is hampered by the loss of regional trade and investment opportunities.
"It's holding the sub-region back, and it is holding the whole Africa region back," he said. "This was a booming economy, this was a net exporter of goods and services in the past. Now exports are falling. It is a country that is a net importer today."
He added that it appeared some countries were helping to bankroll Mugabe through loans or other deals.
"We don't have evidence of the sources, but clearly they are getting some financing," he said.
Funding channels open
The IMF and other key Western donors, including the World Bank, suspended aid to Zimbabwe more than six years ago over Mugabe's economic policies that are blamed for the economic meltdown.
Western donors withdrew aid and other assistance, accusing Mugabe of widespread human rights violations and for seizing white-owned farms, which has turned the country from a regional bread basket to a nation barely able to feed itself.
Despite the problems, Bio-Tchane said Zimbabwe could quickly access outside help once it made the necessary economic reforms.
While the IMF in February maintained its suspension of financial and technical assistance to Zimbabwe, Bio-Tchane said efforts to repay some $129m in arrears to the fund had kept open its chances to obtain immediate international help.
"They could be quickly eligible for technical assistance. And for funds, I must say, in the case of Zimbabwe it is really the political commitments of the government that are preventing everyone from cooperating."
- Reuters