Zimbabwe

Zimbabwe is currently a crumbling economy facing a grave economic crisis, according to the Economic Report on Africa 2002. The economy has been contracting since 2000, and the outlook for 2002 shows an increasing incidence of food insecurity, poverty, and inflation and worsening balance of payments.

Poor weather conditions coupled with farm invasions have caused the lowest agricultural performance in recent years (with negative 9.5% in 2001). Manufacturing output continued on a downward trend, posting a growth rate of negative 5% in 2001. Tourism also suffered in 2001, with the number of tourist visitors continuing to fall. Declining export receipts, currency depreciation and growing insolvency among agricultural and manufacturing enterprises have undermined stability in the financial sector and fueled capital flight.

The Report notes the tendency for inconsistency in government policies. For example, the Reserve Bank's effort to control monetary expansion has been undermined by the Government's frequent resort to central bank financing of its rising fiscal expenditures. Thus, in the face of supply failures in agriculture and manufacturing, inflation soared to 112% in 2001, while the nominal exchange rate depreciated by more than 30% between 1999 and 2001.

The land issue is at the heart of Zimbabwe's national economic crisis. The global community appreciates the inequities in land distribution in Zimbabwe. However, in view of the deleterious effects of the land invasions on agricultural output and on general confidence in governance processes in Zimbabwe, the Report advocates that land redistribution should go hand in hand with good governance to protect output and jobs.

The Report also cautions that Zimbabwe's economic outlook for 2002 has to take into consideration the poor weather conditions that might worsen agricultural output, and also the general governance situation. The chance to avert crisis lies in protecting due process and democratic principles, improving governance, and adopting a more prudent fiscal stance. However, Zimbabwe's economy has strong foundations, and a turn-around within the medium term remains a real possibility.