Zim economy is dying – World Bank

By Ndakaziva Majaka

The World Bank has confirmed that Zimbabwe’s economy is dying, downgrading the country from its list of improved economies to the unflattering tier of struggling countries, as Harare’s political and economic turmoil continues to escalate.

In its latest publication titled Africa’s Pulse, the Bretton Woods institution said the country had failed to register significant economic growth over the past few years.

“Zimbabwe’s fiscal deficit has deteriorated as remedial actions have been limited and this has resulted in the country registering a negative correlation between the cyclical components of government consumption and GDP,” it said.

Other fragile sub-Saharan states which were also placed in the same “falling behind” group included Burundi, the Comoros, Guinea, Lesotho and Swaziland.

This latest vote of no confidence in the country comes as Zimbabwe’s worsening economic situation has seen President Robert Mugabe’s government fighting hard to contain rising civil unrest that has resulted in violent clashes between ordinary citizens and authorities.

Analysts blame Zanu PF’s misrule and populist policies, such as its disastrous fast-track land reforms and the controversial indigenisation legislation for discouraging foreign direct investment inflows and causing massive company closures that have pushed the country’s unemployment rate above 90 percent, among a myriad other ills.

Economists have also said the government’s imminent introduction of bond notes is worsening the country’s cash crisis and triggering panic withdrawals from banks, with jittery Zimbabweans swamping financial institutions in their desperate bid to take out all their money ahead of the launch of the distrusted surrogate currency.

The Daily News established last week that the heightened demand for cash had forced stretched banks to reduce their withdrawal limits further – in some cases to as low as $20 per day – and in turn feeding into the growing fears that Zimbabwe has now completely run out of money.

This also comes as small American dollar denominations, including dirty and tattered notes, have disappeared from the market – amid speculation that the government is mopping up the scarce greenback ahead of the introduction of the bond notes early next month.

A banking source who spoke to the Daily News said the cash situation across the country had become “desperate”.

“We are down to our bare bones. There is no money, which is why we have had to reduce withdrawals further to as little as $20, to try and serve as many people as we can,” the source said.

Former Finance minister Tendai Biti said Zimbabwe was now in “a huge crisis”, adding that the further slashing of withdrawal limits was “a tell-tale sign”.

“The cash crisis is deepening, meaning that the banks’ margin of operation in respect of physical disbursement of cash has become limited and in some cases non-existent.

“Compounding the situation is the fact that the public is afraid of the bond notes and hence everyone who has a salary in the bank is rushing to get it out before the invasion of the notes.

“So we are in the middle of a banking storm because of the total collapse of the system emanating from a lack of trust by the public. The crisis will only get worse and the introduction of bond notes was always going to be suicidal on the part of government. It is the endgame,” the former treasury chief said.

“These are turbulent times in Zimbabwe, where escalating protests and rifts in the ruling Zanu PF party are eroding the tight grip that Mugabe has held since independence from white minority rule in 1980,” economic commentator Francis Mukora said.

“Chickens are now coming home to roost for Mugabe and his Zanu PF. The introduction of bond notes later this month will be the final nail on this economy,” he added.

In the meantime, the government’s quest to introduce the much-distrusted bond notes continues to face challenges.

After seeing her urgent application challenging the introduction of bond notes at the Constitutional Court thrown out on a technicality, former Vice President Joice Mujuru has since escalated her objections to the surrogate currency by asking the RBZ to reveal the law it will use to back their introduction.

At the same time, Harare businessman and known industrialist, Frederick Mutanda, has also filed a High Court suit challenging the procedure and legality of the bond notes. Daily News