A surge in prices of basic commodities and a sharp slide by the Zimbabwe dollar on the parallel market in past weeks could undo a fresh initiative by President Robert Mugabe to halt the economy’s free fall, further putting pressure on his grip on power, analysts said.
Crisis-weary Zimbabweans have in the past week awoken to a sharp increase in the price of bread, the second staple food, while transport fares for urban workers have doubled in some instances, effectively forcing most people to walk for several kilometres to work.
In the meantime, the Zimbabwe dollar has depreciated further on the black market, weakening from Z$320 000 to the greenback at the start of last week to about Z$400 000 on Wednesday.
The local unit is officially pegged at Z$101 195 to the United States dollar. But most Zimbabweans, including private firms and some government departments, depend on the illegal but thriving black market for foreign currency.
Mugabe’s government launched a new economic recovery initiative on April 19, which it dubbed the National Economic Development Priority Plan (NEDP), touting it as the panacea to a long-running economic recession that has seen inflation spiral to nearly 1 200% and sparked shortages of hard cash, fuel and electricity.
“The price increases are being pushed by rising business costs and that has its roots in the perceived value of the Zimbabwe dollar,” says Harare economist James Jowa. “The consequences are obviously the impact on inflation and, ultimately, more increases in prices creating a vicious cycle.”
Analysts say the price increases threaten efforts by the government to turn around the economy, which the World Bank cites as the worst-performing for a country outside a war zone.
Reviving the comatose economy has become key to Mugabe’s government to ease rising tensions, especially in urban areas, the hotbed of opposition support, as poverty deepens and families battle to eke out a living.
Under the NEDP, the Reserve Bank of Zimbabwe sees direct and indirect foreign-currency inflows amounting to $2,5-billion within 90 days. But 62 days down the line, analysts cast doubt on the government’s capacity to attract such forex inflows.
“It is difficult to imagine how they can raise $2,5-billion when the whole of last year we only managed far less,” says John Robertson, an economic consultant.
“We can only start seeing positive changes when we address fundamental issues such as restoring the rule of law and confidence, which will ultimately trigger some investment that the country desperately needs,” Robertson says.
Mugabe’s critics say a change in Zimbabwe’s economic fortunes lies in political reform, insisting that the veteran leader has driven the Southern African nation to near ruin through controversial policies such as the arbitrary seizure of land from white commercial farmers.
The price of petrol this week rocketed to between Z$400 000 and Z$500 000 per litre as supplies ran out — despite a much-publicised $50-million fuel deal signed between European bank BNP Paribas and Mugabe’s government.
The deal was secured by mortgaging nickel output from Bindura Nickel Corporation.
Zimbabwe has experienced intermittent fuel shortages since 2000 and several deals, including with Libyan and Kuwaiti firms, have collapsed after Harare failed to pay.
Zimbabweans say they are now used to frequent price increases, taking with them huge wads of cash for basic shopping. Many families have drastically scaled down on their needs, in many cases to the barest minimum for survival.
“What is important now is to keep body and soul together; life has become tough and unbearable,” says Anita Kumbawa, a vegetable vendor in Harare’s Avenues area who has to contend with frequent raids from municipal police.
“What do they want me to do? This is my only source of income,” she says in the local Shona language, a three-month-old baby strapped on to her back. — ZimOnline