Zimbabwe’s Major Economic Crisis
Zimbabwe is set to plunge into one of the worst economic crisis in the world. Zimbabweans have experienced the inflation rate rise at a fast rate due to shortages of basic goods due to the underlying lack of dollars to pay for the goods. Some vital commodities like fuel, health, warehousing, and several other commodities have been missing in the market for weeks.
In the capital of Harare, motorists have had to queue for long hours outside petrol stations without any hope of refilling their vehicles while most supermarkets have remained closed for days due to lack of commodities. According to the minister of finance, Nthuli Ncube, the recent shortages in fuel was caused by the government’s decisions to allow platinum and gold companies to retain their dollar earnings which resulted in fewer dollars for fuel imports. Similar cases have been reported in most chemists, with most of them unable to provide some of the basic medicines.
Economic development in Zimbabwe
After the recent change of guard that put Mnangagwa as the president, economists view this as a chance for Zimbabwe to lead into stability. Instead, his first two months has been hit with the worst economic crisis in over a decade which has been caused by a combination of shortages of foreign currencies and huge government debts. For the better part of 2018, Zimbabwe has been denied access to international loans and grants because it has defaulted all its debts and accrued up approximately $6 billion dollars. Moreover, tax revenue collected by the government falls below its required spending needs as it battles with high unemployment rates which sit at about 90%. The limited number of companies in the country has also made it difficult for Zimbabwe to have a stable economy.
What really caused the economic crisis in Zimbabwe?
Mismanagement of public funds. Most observers view the economic crisis in Zimbabwe as a fiscal one. An increasing amount of news has emerged explaining how the public debts and deficit was accrued by the ruling government since 2012 when the country had a debt of 275.8 million USD. But what really caused this crisis, what caused the skyrocketing of prices of commodities? The answers could be either there is disastrous economic management or the problem is deeply rooted in the country’s political system.
Other than causing the large and ineffective state of the economy in Zimbabwe, it is also seen as a major cause of costly and widespread corruption in the country. Patronage has cost the productivity of the country to be extremely low in the past two decades. Mnangagwa, shortly after coming into power admitted that corruption in the public sector has completely crippled the economy of the country and has greatly reduced its public expenditure. This has cost Zimbabwe up to 1 billion USD annually and this shows how costly corruption is in Zimbabwe. Mnangagwa, however, is keen on eradicating corruption, with a few high profile individuals in his administration having been brought to justice over corruption allegations and fraud. What effects does the economic crisis have on its people and the governed?
The increasing cost of healthcare
The economic crisis experienced in Zimbabwe has had a great impact on its people as well as the government. The costs of commodities have skyrocketed, some even going for up to triple the initial price. Some of the worst-hit industries include the mining industry, the healthcare industry, and the transport industry. A Zimbabwean citizen stated that the cost of her diabetes medication has tripped and the pharmacists instead in payment via the US dollars. She claims that being sick in Zimbabwe has become a costly burden. Most people on an average salary cannot buy the basic medications let alone the expensive medications. Some with critical conditions have been forced to seek medical attention in the neighboring countries of Zambia and South Africa. For instance, the cost of hypertension treatment that was 150 USD earlier is now at around 790 USD. This will soon paralyze the health industry and medical treatment will be done elsewhere, considering that it might be cheaper to travel and get the same treatment in countries like South Africa.
The government lacks funds to allocate to vital sectors
The main cause of the rise in medical bills is the government’s deficits that resulted in it to allocate little funds to the health sector. This caused the government, as well as the responsible organizations, have difficulties in the importation of raw materials required in the manufacture of medicines. The decline of professionals in the health sector also worsened the already deteriorating situation in the health sector. Most of these professionals have left the country for other well-paying countries only living the country in a devastating state.
Food shortages in most cities
The economic crisis has also affected the food sector in Zimbabwe with the WFP warning Zimbabweans could need food aid in the next few months. Recently, the economic crisis was responsible for the distortion of prices of wheat and grain. This comes in the recent shortage of these commodities considered as a staple food in Zimbabwe and has led to the rise of its prices as a result of an unstable market. It has made it difficult for millers to purchase these products for milling purposes. The shortage of wheat and other grains has dire consequences to the people of Zimbabwe especially since they highly rely on these crops. The financial constraints have also made it difficult to provide basic needs like feeds and the required medications meant to reduce cattle diseases.
Investors are unwilling to invest in Zimbabwe
A decline in investment in has also seen industries such as the mining, tourism, manufacturing and agricultural industries been crippled. As a result of the economic crisis, there is a lack of recapitalization and working capital which has led to the underperformance of these industries some of which have become very unreliable.
The economic crisis in Zimbabwe is very critical and needs immediate attention. Otherwise, the country is heading for the worst crisis to have been experienced. The president is determined to tackle these issues and has publicly opened up to investors from other countries to help fix this issue. The main problem, however, is in his administration. He is fighting heavily to bring sanity to his administration once and for all and we have seen several individuals in his administration brought to book.