Final Report

Zimbabwe economy
Group Members: MIRZA ZOHAIB ALI
ZEESHAN KHAN

Submitted To: MISS ALIA CHISHTI

Dated: 21/11/2017
Acknowledgement
First of all we are very thankful to our Almighty Allah who gives us the ability and energy
to complete this report. We are really grateful because we managed to complete our
role in this report. This report cannot be completed without the effort and corporation of
our family. We also sincerely thank my family for the guidance and encouragement in
finishing the report Last but not the least, we would like to express my gratitude to my
Family and friends for the support and willingness to spend time with me to fill in the
questionnaires.

Table of Contents

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 1. Introduction ……….……………………………….……………… 04
2. Problem statement ….…………………………………………… 05
3. Recommendations ……………………………………………… 10
4. Refrences ………….…...……………….………………………. 11

Introduction

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The economy of “Zimbabwe” shrunk significantly after 2000, resulting in a desperate
situation for the country – widespread poverty and a 95% unemployment rate..
Zimbabwe's participation from 1998 to 2002 in the “war in the Democratic Republic of
the Congo” set the stage for this deterioration by draining the country of hundreds of
millions of dollars. Hyper inflation in Zimbabwe was a major problem from about 2003 to
April 2009, when the country suspended its own currency. Zimbabwe faced 231 million
percent peak hyperinflation in 2008. A combination of the abandonment of the
Zimbabwe dollar and a government of national unity in 2009 resulted in a period of
positive economic growth for the first time in a decade.

The country has reserves of metallurgical-grade chromite. Other commercial mineral

deposits include coal, asbestos, copper, nickel, gold, platinum and iron ore.

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Problem Statement

economic conditions

Since 2000, Zimbabwe has seized and forcibly redistributed most of the country's white
owned commercial farms. The new occupants, which included black only citizens and
several prominent members of the ruling ZANU-PF administration, were usually inept,
inexperienced, or uninterested in farming – thereby failing to retain the labour-intensive,
highly efficient management of previous landowners. Short term gains were achieved
by selling the land or equipment. The contemporary lack of agricultural expertise has
triggered severe export losses and negatively affected market confidence. Idle land is
now being utilised by rural communities practicing subsistence farming. Production of
staple foodstuffs, such as maize, has recovered accordingly – unlike typical export
crops including tobacco and coffee. Zimbabwe has also sustained the 30th occurrence
of recorded hyperinflation in world history.

Government spending is 29.7% of GDP. State enterprises are strongly subsidized,

taxes and tariffs are high. State regulation is costly to companies, starting or closing a
business is slow and costly.Labour market is highly regulated, hiring a worker is
cumbersome and firing a worker is difficult. By 2008 unemployment had risen to 94%.

A 2014 report by the Africa Progress Panel has found that of all the African countries
looked at when working out how many years it would take to double per capita GDP,
Zimbabwe fared the worst and that at its current rate of development it would take 190
years for the country to double its per capita GDP. Uncertainty around the
indigenisation programme, the perceived lack of a free press, the possibility of
abandoning the US dollar as official currency, and political uncertainty following the end
of the government of national unity with the MDC as well as power struggles within
ZANU-PF have increased concerns that the country’s economic situation could further
deteriorate.

In September 2016 the finance minister identified "low levels of production and the
attendant trade gap, insignificant foreign direct investment and lack of access to

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international finance due to huge arrears" as significant causes for the poor
performance of the economy.

2000 – 2009 Land reform in Zimbabwe

In recent years, there has been considerable economic hardship in Zimbabwe. Many
western countries argue that the Government of Zimbabwe's 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.

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, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output
dropped by 51% and industrial production dropped by 47%.

The Mugabe Government attribute Zimbabwe's economic difficulties to sanctions

imposed by the Western powers. It has been argued ] 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 targeted against
Mugabe and his inner circle and some of the companies they own. Critics 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.

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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.

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.

Hyperinflation 2004–2009

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 severe. 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.

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.

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.

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) In November 2006,

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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.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) and by
year end it had fallen to ZWD 3,000 per USD.

On 1 April 2007, the parallel market was asking ZWD 30,000 for $1 USD.] 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. At the time of first issue they were worth US$0.70 &
US$1.40 on the parallel market respectively.

On 1 May 2008, the RBZ announced that the dollar would be allowed to float in value
subject to some conditions.

On 6 May 2008, the RBZ issued new $100 million and $250 million bearer cheques. 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. 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).] It is
further reported that the new agro-cheques can be used to buy any goods and services
like the bearer Cheques..

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.

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

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$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)

On February 2, 2009 a final denomination was implemented, cutting 12 zeroes, before

the Zimbabwe dollar was officially abandoned on April 12, 2009. Pending economic
recovery, Zimbabwe relied on foreign currency rather than introducing a new currency.

Poverty and unemployment

Poverty and unemployment are both endemic in Zimbabwe, driven by the shrinking
economy and hyper-inflation. Poverty rates in 2007 were nearly 80%, while the
unemployment rate in 2009 was ranked as the world's largest, at 95%.

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. A nurse's
salary in September was Z$12,542 (12 US cents), less than the cost of a soft drink.

The lowest 10% of Zimbabwe's population represent 1.97% of the economy, while the
highest 10% make 40.42%. (1995).[ The current account balance of the country is
negative, standing at around US -$517 million. The negative economic environment
since the year 2000 has also impacted Zimbabwean entrepreneurs with a large number
of them going bankrupt between 2000 and 2014.

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Recommendation

Zimbabwe improve our currency system with foreign currency system and provide jobs
to people for maximum amount of people are employed and the great impact on GDP of
Zimbabwe through this and imports and exports systems better and predict our
economy system and made useful policies for our economy and made powerful
implement for face any issue in economy in future then easily to faced any issue. The
unemployment rate is better this impact on country GDP is right ,and controlled our
hyperinflation rate and give job to people.

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References

Wikipedia

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