Recent studies have shown Zimbabwe has the fastest-shrinking economy in the world — outside of a war zone, that is. It also has the highest inflation in the world at 782%, followed by Iraq at 40%. To top it off, Zimbabwe has the weakest currency in Africa.
Countries reeling from bouts of civil war such as Sudan, Somalia and Côte d’Ivoire and poverty-ridden ones like East Timor, Afghanistan and Guinea-Bissau have lower rates of inflation than Zimbabwe, which is not classified a poor country by the United Nations even with its current conditions. Zimbabwe is endowed with human capital and natural resources. This is why the prevailing situation is such an indictment of Mugabe, whose regime has distinguished itself for being corrupt and incompetent. No amount of revolutionary demagoguery by Mugabe and his hangers-on can mask this.
Mugabe’s rule has become costly and unsustainable. His continued hold on power is proving to be an active agent of economic decline, poverty and sociopolitical instability. The collateral damage of Mugabe’s reign on regional economies is also ominous.
Zimbabwe’s rampant inflation is soon expected to break the 1000% mark as government continues to print money on a massive scale to keep itself in power. After that the country will plunge in to a spiral of hyperinflation. The country has, over the past couple of months, printed Z$46-trillion to pay international debts and sustain government operations.
Mugabe has come out in defence of printing money, a move which all but confirmed the policy bankruptcy of his regime. For a president who is supposed to be an educated economist — with seven university degrees — it is even more embarrassing.
A study titled Macroeconomics in the Global Economy by Jeffrey Sachs and Felipe Larrain B, notes that the main causes of inflation are revolutions, wars, civil strife and exogenous factors, which all inevitably lead to the printing of money. Printing money increases money supply growth and hence inflation.
For the US, before the 20th century, the main cause of inflation — which peaked at an annual rate of 5570% and 40% monthly in 1864 — was printing money to finance the civil war. At one time over 80% of the total US government financing was from paper money. The same situation gripped Europe after wars.
During the 1980s, hyperinflationary conditions developed in many Latin American such as Argentina, Brazil, Bolivia, Peru and Nicaragua, and in the former Yugoslavia. The situation in Zimbabwe is different from these other countries but the conditions for hyperinflation already exist. The economic indicators, unemployment, interest rates, exchange rate and business performance, are grim.
Corruption has also reached alarming levels. Government and the ruling Zanu (PF) officials are falling on each other to strip the economy of its assets and loot whatever remains. The officials have descended on the cadaverous economy like vultures. They have taken farms, safaris, companies, they are looting minerals and now they want to grab mines. They are also abusing public assets for private gain. This has been acknowledged by government itself but nothing is being done to save the economy. Rent-seeking behaviour in the public and private sectors is also rampant. These issues are accelerating economic collapse.
The divided opposition party Movement for Democratic Change (MDC) and civil society movements are disorganised and weak. The MDC wrangles have ensured that the party becomes ineffective and not a notable threat to Mugabe. If the MDC and civil society groups were strong, Mugabe’s regime would not last long. The economic hardships and popular discontent, if capably exploited by the MDC, would be the most lethal political weapon against the Mugabe.
Ultimately, the economy will be the agent of change in Zimbabwe — not the MDC. The economy and dynamics in Mugabe’s party are now the major driving forces behind slow but sure collapse of Mugabe’s regime.
There is no elected government in modern history which has survived four-digit levels of inflation and such an economic crisis. The writing is on the wall — the economy will be Mugabe’s downfall.
* Muleya is Harare correspondent and Zimbabwe Independent news editor.