Economy of Zimbabwe: Difference between revisions
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It has been reported by various NGOs that the diamond sector in Zimbabwe is rife with corruption; a November 2012 report by NGO Reap What You Sow revealed a huge lack of transparency of diamond revenues and that Zimbabwe’s elite are benefitting from the country’s diamonds.<ref>{{Citation |
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| url = http://allafrica.com/stories/201211151002.html |
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| title= Zimbabwe: Reap What You Sow - Greed and Corruption in Marange Diamond Fields |
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| year = 2012 |
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| publisher = [[Allafrica.com]] |
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| publication-place = [[Africa]] |
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| accessdate = 16 November 2012 |
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}}</ref> This followed former South African President [[Thabo Mbeki|Thabo Mbeki’s]] warning days earlier that Zimbabwe needed to stop its “predatory elite” from colluding with mining companies for their own benefit.<ref name=ALL>{{Citation |
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| url = http://allafrica.com/stories/201211130777.html |
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| title= Zimbabwe: Mbeki Lectures Zim - Report |
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| year = 2012 |
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| publisher = [[Allafrica.com]] |
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| publication-place = [[Africa]] |
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| accessdate = 20 November 2012 |
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}}</ref> |
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Also in that month, the [[Associated Press]] reported that at least $2 billion worth of diamonds had been stolen from Zimbabwe’s eastern diamond fields and had enriched Mugabe’s ruling circle and various connected gem dealers and criminals.<ref name=ALL /> |
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In January 2013, Zimbabwe’s mineral exports totalled $1.8 billion.<ref>{{Citation |
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| url = http://allafrica.com/stories/201301280787.html |
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| title = Zimbabwe: Mineral Exports Net U.S.$1,8 Billion |
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| year = 2013 |
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| publisher = [[AllAfrica.com]] |
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| publication-place = [[Africa]] |
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}}</ref> |
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===Education=== |
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Zimbabwe has one of Africa's highest [[literacy]] rates at over 90%. The population is usually better educated than the African average, making the people one of the greatest assets of this country. The crisis since 2000 has however diminished these achievements because of general lack of resources and the exodus of teachers to other countries. |
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==History== |
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{{See also|Economic history of Zimbabwe}} |
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[[File:Zim GDP growth 1980-2010.svg|right|thumb|400px| Zimbabwe's [[GDP]] annual percentage growth rate from 1980 to 2010.<ref name="WDI">{{cite web | url=http://databank.worldbank.org/ddp/home.do?Step=3&id=4 | title=World Development Indicators | publisher=World Bank | accessdate=January 6, 2012}}</ref>]] |
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[[File:Zim GDP per capita 1980-2010.svg|right|thumb|350px| Zimbabwe (green {{color box|#008000}}) and the average for [[Sub-Saharan Africa|Sub-Saharan Africa's]] (orange {{color box|#FF8C00}}) [[GDP per capita]] in constant year 2000 US dollars from 1980 to 2010.<ref name="WDI">{{cite web | url=http://databank.worldbank.org/ddp/home.do?Step=3&id=4 | title=World Development Indicators | publisher=World Bank | accessdate=May 31, 2012}}</ref>]] |
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===1980-2000=== |
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At time of independence annual inflation was 5.4 percent and month-to-month inflation was 0.5 percent. Currency of Z$2, Z$5, Z$10 and Z$20 denominations was released. US$1 was equivalent to Z$0.657. For around 95 percent transaction Zimbabwean dollar was used.<ref name="dallasfed.org"/> |
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Following the [[Lancaster House Agreement]] in December 1979, the transition to majority rule in early 1980, and the lifting of sanctions, Zimbabwe enjoyed a brisk economic recovery. Real growth for 1980-1981 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However it slumped in 1986 to a zero growth rate and registered negative of about minus 3% in 1987 primarily because of drought and foreign exchange crisis faced by the country.{{Citation needed|date=December 2007}} Zimbabwe's [[GDP]] grew on average by about 4.5% between 1980 and 1990.<ref name=b>{{cite book|last=Steenkamp|first=Philip John|coauthors=Rodney Dobell|year=1994|title=Public Management in a Borderless Economy|page=664}}</ref> Government started crumbling when a bonus to independence war veterans was announced in 1997 which was equal to 3 percent of GDP followed by unexpected spent in Congo's civil war in 1998. In 1999 country also witnessed drought which weakened economy more and could not recover which ultimately led to bankruptcy of country in next decade.<ref name="dallasfed.org"/> |
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===2000–2009=== |
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{{See also|Land reform in Zimbabwe}} |
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In recent years, there has been considerable economic hardship in Zimbabwe. Many western countries argue that the [[Government of Zimbabwe]]'s [[Land reform in Zimbabwe|land reform program]], recurrent interference with, and intimidation of the judiciary, as well as maintenance of unrealistic price controls and exchange rates has led to a sharp drop in investor confidence. |
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On 1 November 1989 a former government minister in [[Rhodesia]], [[Denis Walker]], produced a paper in London for the [[Conservative Monday Club]]'s Foreign Affairs Committee on ''Land Reform in [[Zimbabwe]]''. In his last paragraph he stated that "once the land has been redistributed, the commercial farms will be broken up, the remaining white farmers reduced by exile or imprisonment; Zimbabwe's government, already morally bankrupt, will decline towards economic collapse." |
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Between 2000 and December 2007, the national economy contracted by as much as 40%; inflation vaulted to over 66,000%, and there were persistent shortages of [[hard currency]], [[fiat currency]], fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%. |
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Direct foreign investment has all but evaporated however there is renewed activity in indirect investment via international partnerships with South Africa in particular. In 1998, direct foreign investment was US $400 million. In 2007, that number had fallen to US $30 million <ref name="zimbabwesituation.com"/> |
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How much money was spent in the country's involvement in the [[Second Congo War|war]] in the [[Democratic Republic of the Congo]] has never been reported nor the benefits derived from the military's involvement in commercial mining in that country. Price controls have been imposed on a wide range of products including food ([[maize]], bread, steak), fuel, medicines, soap, electrical appliances, yarn, window frames, building sand, agricultural machinery, fertilisers and school textbooks. |
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The Mugabe Government attribute Zimbabwe's economic difficulties to sanctions imposed by the Western powers. It has been argued{{By whom|date=April 2010}} that the sanctions imposed by Britain, the US, and the EU have been designed to cripple the economy and the conditions of the Zimbabwean people in an attempt to overthrow President Mugabe's government. These countries on their side argue that the sanctions are tareted against Mugabe and his inner circle and some of the companies they own. Critics{{Who|date=April 2010}} point to the so-called "Zimbabwe Democracy and Economic Recovery Act of 2001", signed by Bush, as an effort to undermine Zimbabwe's economy. Soon after the bill was signed, IMF cut off its resources to Zimbabwe. Financial institutions began withdrawing support for Zimbabwe. Terms of the sanctions made it such that all economic assistance would be structured in support of "democratisation, respect for human rights and the rule of law." The EU terminated its support for all projects in Zimbabwe. Because of the sanctions and US and EU foreign policy, none of Zimbabwe's debts have been cancelled as in other countries.<ref>{{cite web|author=Fri Mar 6 13:51:09 2009 |url=http://allafrica.com/stories/200903060382.html |title=Zimbabwe: Sanctions - Neither Smart Nor Targeted |publisher=Allafrica.com |date=2009-03-06 |accessdate=2010-05-30}}</ref> |
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Other observers also point out how the asset freezes by the EU on people or companies associated with Zimbabwe's Government have had significant economic and social costs to Zimbabwe.<ref>{{cite web|url=http://www.newzimbabwe.com/pages/sanctions36.13187.html |title=Zimbabwe sanctions: are they political or economic? |publisher=Newzimbabwe.com |date= |accessdate=2010-05-30}}</ref> |
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As of February 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the [[International Monetary Fund]] (IMF). This, and the [[United Nations]] [[World Food Programme]] stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources. |
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=== Hyperinflation 2004-2009 === |
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{{See also|Hyperinflation in Zimbabwe}} |
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[[File:ZWDvUSDchart.png|thumb|right|Official, black market, and OMIR exchange rates Jan 1, 2001 to Feb 2, 2009. Note the [[logarithmic scale]].]] |
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Zimbabwe began experiencing severe foreign exchange shortages, exacerbated by the difference between the official rate and the [[black market]] rate in 2000. In 2004 a system of auctioning scarce foreign currency for importers was introduced, which temporarily led to a slight reduction in the foreign currency crisis, but by mid 2005 foreign currency shortages were once again chronic. The currency was devalued by the central bank twice, first to 9,000 to the US$, and then to 17,500 to the US$ on 20 July 2005, but at that date it was reported that that was only half the rate available on the black market. |
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In July 2005 Zimbabwe was reported to be appealing to the South African government for US$1 billion of emergency loans, but despite regular rumours that the idea was being discussed no substantial financial support has been publicly reported. |
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The official [[Zimbabwean dollar]] exchange rate had been frozen at Z$101,196 per U.S. dollar since early 2006, but as of 27 July 2006 the parallel (black market) rate has reached Z$550,000 per U.S. dollar. By comparison, 10 years earlier, the rate of exchange was only Z$9.13 per USD. |
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In August 2006 the RBZ revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar. At the same time Zimbabwe devalued the Zim Dollar by 60% against the [[USD]]. New official exchange rate revalued ZWD 250 per USD. The parallel market rate was about revalued ZWD 1,200 to 1,500 per USD (28 September 2006).{{Citation needed|date=June 2007}} |
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In November 2006 it was announced that sometime around 1 December there would be a further devaluation and that the official exchange rate would change to revalued ZWD 750 per USD.<ref name=k>{{cite web|url=http://www.zimbabwesituation.com/nov17_2006.html#Z12 |title=The Zimbabwe Situation |publisher=The Zimbabwe Situation |date= |accessdate=2010-05-30}}</ref> This never materialized. However, the parallel market immediately reacted to this news with the parallel rate falling to ZWD 2,000 per USD (18 November 2006)<ref name=l>{{cite web|url=http://www.zimbabwesituation.com/nov19_2006.html#Z3 |title=The Zimbabwe Situation |publisher=The Zimbabwe Situation |date= |accessdate=2010-05-30}}</ref> and by year end it had fallen to ZWD 3,000 per USD.<ref name=m>{{cite web|url=http://www.zimbabwesituation.com/jan5a_2007.html#Z13 |title=The Zimbabwe Situation |publisher=The Zimbabwe Situation |date= |accessdate=2010-05-30}}</ref> |
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On 1 April 2007 the parallel market was asking ZWD 30,000 for $1 USD.<ref name=n>{{cite web|url=http://www.zimbabwesituation.com/apr1_2007.html#Z22 |title=The Zimbabwe Situation |publisher=The Zimbabwe Situation |date= |accessdate=2010-05-30}}</ref> By year end, it was down to about ZWD 2,000,000. On 18 January 2008, the [[Reserve Bank of Zimbabwe]] began to issue higher denomination ZWD bearer cheques (a banknote with an expiry date), including $10 million bearer cheques - each of which was worth less than US $1.35 (70p Sterling; 0.90 Euro) on the parallel market at the time of first issue. On 4 April 2008 the [[Reserve Bank of Zimbabwe]] introduced new $25 million and $50 million bearer cheques.<ref name=ac>{{cite news|url=http://www.thetimes.co.za/PrintEdition/Article.aspx?id=742168|title=Fear and hope mingle as Harare awaits election results|publisher=www.thetimes.co.za|date=6 April 2008|accessdate=2008-04-08}}</ref> At the time of first issue they were worth US$0.70 & US$1.40 on the parallel market respectively. |
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On 1 May 2008, the RBZ announced that the dollar would be allowed to float in value subject to some conditions.<ref name = zz/> |
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On 6 May 2008, the RBZ issued new $100 million and $250 million bearer cheques.<ref name=ad>{{cite news|url=http://www.thetimes.co.za/News/Article.aspx?id=761117|title=Zimbabwe’s new $250m note|publisher=www.thetimes.co.za|date=6 May 2008|accessdate=2008-05-08}}</ref><ref name=ae>{{cite news|url=http://www.afriquenligne.fr/news/africa-news/zimbabwe-introduces-new-high-denomination-notes-200805063085.html|title=Zimbabwe introduces new high denomination notes|publisher=''http://www.afriquenligne.fr''|date=6 May 2008|accessdate=2008-05-08}}</ref> At the date of first issue the $250 million bearer cheque was worth approximately US$1.30 on the parallel market. On 15 May 2008, a new $500 million bearer cheque was issued by the RBZ.<ref name=af>{{cite news|url=http://www.int.iol.co.za/index.php?set_id=1&click_id=68&art_id=nw20080515103036882C968918|title=Introducing the new Zim note...|publisher=''http://www.iol.co.za''|date=15 May 2008|accessdate=2008-05-08}}</ref> At time of first issue it was worth US$1.93. In a widely unreported parallel move, on 15 May 2008, the RBZ issued three "special agro-cheques" with face values $5 billion (at time of first issue - $19.30), $25 billion ($96.50) & $50 billion ($193).<ref name=ag>{{cite news|url=http://allafrica.com/stories/200805210105.html|title=RBZ Issues Agro Cheques|publisher=''http://allafrica.com''|date=21 May 2008|accessdate=2008-06-02}}</ref> It is further reported that the new agro-cheques can be used to buy any goods and services like the bearer cheques. |
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On 30 July 2008, the Governor of the RBZ, [[Gideon Gono]] announced that the Zimbabwe dollar would be redenominated by removing 10 zeroes, with effect from 1 August 2008. ZWD10billion became 1 dollar after the redenomination.<ref name=ah>{{cite news|url=http://news.bbc.co.uk/1/hi/world/africa/7532702.stm|title=Zimbabwe introduces new currency |publisher=BBC|date=30 July 2008|accessdate=2008-07-30}}</ref> |
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More banknotes were issued since Gono vowed to continue printing money: $10,000 and $20,000 (29 September); $50,000(13 October); $100,000, $500,000 and $1 million(3 November); $10 million(2 December); $50 million and $100 million(4 December); $200 million (9 December); $500 million (11 December); $10 billion (19 December); $1 trillion (17 January 2009) |
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On February 2, 2009 a final denomination was implemented, cutting 12 zeroes, before the Zimbabwe dollar was officially abandoned on April 12, 2009. Since then, Zimbabwe has issued a new currency.{{Citation needed|date=February 2010}} |
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=== Dollarization: 2009 to present === |
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In February 2009, the newly-installed national unity government allowed foreign currency transactions throughout the economy as a measure to stimulate the economy and end inflation. The Zimbabwean dollar quickly lost all credibility, and by April 2009, the Zimbabwean dollar was suspended entirely, to be replaced by the US dollar in government transactions. Other currencies like the South African rand are in use as well. |
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Dollarization reversed inflation, permitting the banking system to stabilize and the economy to resume slow growth after 2009. Dollarization also had several negative impacts, however: |
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* Reduced taxation and financial transparency, as people continued to keep their money out of the formal banking system. |
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* Extremely high real interest rates due to lack of capital. |
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* Government forced into a "pay as you go" system, unable to spend more than it takes in. |
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* Deficits of coinage for everyday transactions, leading the adoption of South African rand coins for sub-dollar transactions. |
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In January, 2013 Finance Minister Tendai Biti announced that Zimbabwe's national public account held just $217.<ref>http://www.google.com/hostednews/afp/article/ALeqM5g6UjhOacudCqlmmp8nbCwgBzi3gw?docId=CNG.f4e90e8af525f8288a2f59483d48735f.591</ref> Expected election budget for upcoming presidential election which is going to held in 2013 is $104 million and government budget for upcoming year is $3.09 billion at projected economic growth of 5 per cent.<ref>[http://www.aljazeera.com/news/africa/2013/01/2013130134525141101.html] Zimbabwe's bank balance stands at $217</ref> |
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==Poverty and unemployment== |
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Poverty and unemployment are both endemic in Zimbabwe, driven by the shrinking economy and hyper-inflation. Poverty rates run near 80%,<ref name=g>{{cite news|url=http://www.economist.com/world/africa/displaystory.cfm?story_id=9475943|title=How to stay alive when it all runs out|publisher=The Economist|date=12 July 2007|accessdate=2007-07-18}}</ref> while the unemployed in ranked as the world's largest, at 95%.<ref>https://www.cia.gov/library/publications/the-world-factbook/geos/zi.html</ref> |
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As of January 2006, the official poverty line was ZWD 17,200 per month (US$202). However, as of July 2008 this had risen to ZWD 13 Trillion per month (US $41.00) . Most general labourers are paid under ZWD 200 Billion (US 60c) per month.<ref>{{cite web|last=Matibe |first=Phil |url=http://www.zimbabwesituation.com/jul18_2008.html#Z17 |title=The Zimbabwe Situation |publisher=The Zimbabwe Situation |date=2008-07-17 |accessdate=2010-05-30}}</ref> A nurse's salary in September was Z$12,542 (12 US cents), less than the cost of a soft drink. |
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The lowest 10% of Zimbabwe's population represent 1.97% of the economy, while the highest 10% make 40.42%. (1995).<ref name=h>CIA World Fact Book 2003 http://www.umsl.edu/services/govdocs/wofact2003/geos/zi.html</ref> The current account balance of the country is negative, standing at around US -$517 million.<ref name=i>http://www.zimbabwesituation.com/jul28b_2006.html#Z2 Zimbabwe Budget puts government at ZWD 253 trillion in the red. (2006-07-27)</ref> |
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===Government response=== |
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The 2007 Empowerment Bill to increase local ownership of economy was drafted for presentation to parliament in July 2007.<ref name=j>[http://www.zimbabwesituation.com/jun8a_2007.html#Z14 2007 Empowerment Bill (2007-06-09)] Zimbabwe Situation</ref> It was signed into law by President Mugabe on 7 March 2008. The law requires all White or foreign owned business to hand over 51 percent of their business to indigenous Zimbabweans. Many economists predict this will plunge the country into deeper economic woes{{Citation needed|date=August 2008}}. |
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In response to inflation the government has introduced [[price controls]], but enforcement has been largely unsuccessful.<ref>{{cite web|url=http://www.dailycomet.com/article/20070701/API/707010602 |title=The Thibodaux Daily Comet | Thibodaux, LA |publisher=DailyComet.com |date=2007-07-01 |accessdate=2010-05-30}}</ref> Police have been sent in to enforce requirements that shopkeepers sell goods at a loss. This has resulted in hundreds of shop owners being arrested under accusations of not having lowered prices enough. Because of this, basic goods no longer appear on supermarket shelves and the supply of [[petrol]] is limited. This has diminished public transport. This has not been a significant problem during the term of Reid. However, goods can usually be purchased for a high rate on the [[black market]].<ref name=g/> |
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In January 2010, Finance Minister [[Tendai Biti]] announced that Zimbabwe would seek highly indebted poor country (HIPC) status in order to cancel the country's $6 billion debt. Despite criticism from some government officials and economists,<ref>{{cite news|url=http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100322/FOREIGN/703219940/1017/rss|title=Zimbabwe split over $5.7 billion debt plan|work=The National|date=March 21, 2010}}</ref> Biti stated that, among other strategies considered, seeking HIPC status was the best option.<ref>{{cite news|url=http://af.reuters.com/article/topNews/idAFJOE60H0QC20100118|title=Zimbabwe seeks HIPC status for debt relief: minister|work=Reuters Africa|date=January 18, 2010}}</ref> In addition to debt forgiveness, HIPC status (which is attained from the International Monetary Fund (IMF) and World Bank) would also allow Zimbabwe access to World Bank resources and loans through the IMF’s Poverty Reduction and Growth Facility.<ref>{{cite news|url=http://www.reuters.com/article/idUSLQ720260|title=Zimbabwe should seek HIPC debt relief, minister says|work=Reuters|date=September 26, 2009 | first=Adrian | last=Croft}}</ref> |
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==The Government of National Unity== |
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By the start of the 2009 the situation had been catastrophic for some time. The three parlamental parties agreed on a Government of National Unity. Despite serious internal differences this government made some important decisions that improved the general economic situation, first of all the suspension of the national currency, the Zimbabwean Dollar in April 2009. That stopped hyperinflation and made normal forms of business possible again, by using foreign currency such as the [[United States dollar|US American Dollar]], the [[South African Rand]], the EUs [[Euro]] or the [[Botswana Pula]]. The finance minister [[Tendai Biti]] ([[Movement for Democratic Change – Tsvangirai|MDC-T]]) tries to hold a disciplined budget. Zimbabwe recorded in 2009 an economic growth for the first time in a decade.<ref name=CIA2010/> |
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==See also== |
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*[[Economy of Africa]] |
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*[[Economic history of Zimbabwe]] |
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*[[History of Zimbabwe]] |
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*[[Zimbabwean dollar]] |
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*[[Tobacco Trade in Zimbabwe]] |
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==References== |
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{{reflist|colwidth=30em}} |
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==External links== |
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*{{dmoz|Regional/Africa/Zimbabwe/Business_and_Economy/Economic_Development}} |
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*[http://www.trademap.org/open_access/Index.aspx?proceed=true&reporter=716 Zimbabwe latest trade data on ITC Trade Map] |
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*[https://www.cia.gov/library/publications/the-world-factbook/geos/zi.html CIA World Fact Book] |
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*[http://www.mbendi.co.za/land/af/zi/p0005.htm MBendi Zimbabwe overview] |
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*[http://www.zimbabwesituation.com/jun20_2007.html#Z6 Donors will move in when Mugabe finally leaves office] |
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{{Africa in topic|Economy of}} |
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*[https://www.cia.gov/library/publications/the-world-factbook/geos/zi.html] |
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{{DEFAULTSORT:Economy Of Zimbabwe}} |
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[[Category:African Union member economies|Zimbabwe]] |
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[[Category:Economy of Zimbabwe| ]] |
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[[Category:World Trade Organization member economies|Zimbabwe]] |
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[[Category:Economic disasters|Zimbabwe]] |
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Revision as of 16:01, 12 April 2013
Arif Mohamed Ahmed is Ruller of all of AFRCIAAA BIATCHHHHH