Though not posing a threat to South Africa’s financial-system stability, a total collapse in Zimbabwe could have wider political, economic and social consequences for the region, the South African Reserve Bank (SARB) cautioned on Monday.
In its latest financial-stability review, the SARB said the economic and political difficulties in Zimbabwe seem to be deepening.
It said a recent International Monetary Fund (IMF) Article IV mission indicated that real production in South Africa’s neighbouring state is likely to decline by a further 7% this year.
Foreign currency reserves, it said, are down to three days’ worth of imports, with forex shortages restricting essential imports needed for industrial and agricultural production, fuel, energy and basic commodities, further exacerbating the decline of the formal economy and the government’s revenue base.
Zimbabwe’s headline inflation rate increased to 265,1% year-on-year in August this year, from 254,8% in July. The country’s Budget deficit is estimated to exceed 14% of gross domestic product, while unemployment is currently estimated at 75%, with more than 70% of the population living under the poverty line.
“Food shortages, exacerbated by drought affecting the entire sub-region, have been an additional challenge, particularly in the rural areas.
“According to a United Nations report of the fact-finding mission to Zimbabwe to assess the scope and impact of Operation Murambatsvina, the widely condemned government initiative ‘Operation Restore Order’ has led to an estimated 700 000 people in cities across the country either losing their homes or their livelihoods or both.
“The operation has had a major economic, social, political and institutional impact on Zimbabwean society and its effects will be felt for many years to come,” the SARB said.
“Though not posing a threat to South Africa’s financial-system stability, a total collapse in Zimbabwe could have wider political, economic and social consequences for the region,” it added. — I-Net Bridge