FInancial antirecord

Politics Materials 22 July 2008 12:07 (UTC +04:00)

Today, Zimbabwe is considered to be the most unfortunate country in the world. Country's inflation growth rate is world's highest. Zimbabwe Central Bank reported on 16 July that inflation in the country amounted to 2.2mln percent per year, while unofficial reports say the figure is 10-15mln percent.

That is a next consumer prices' growth rate record in Zimbabwe. According to the Central Statistical Committee of Zimbabwe, in April 2008, annual inflation reached 165,000.Endavours to freeze prices in June 2007 gave no results.

Given high inflation, Zimbabwe Government has to rapidly increase the nominal of issued banknotes - a 10mln Zimbabwe dollar note was issued in January 2008, a 50mln Zimbabwe dollar note in April, 100mln and 250mln Zimbabwe dollar notes in May and 5bln, 25bln and 50bln Zimbabwe dollar notes were issued later.

A 50mln Zimbabwe dollar note, which was put into turnover in April, corresponded to 1 USD at black market. Then, the note could be exchanged for three bread loaves. The chief financier of Zimbabwe's opposition Movement for Democratic Change Elton Mangoma said he uses a 10mln Zimbabwe dollar note as a bookmark, and if he drops it he would not stoop down to pick it up.

One day paper required for printing of notes ran out in Zimbabwe, after European Union prohibited German Giesecke & Devrient from printing notes for Zimbabwe within the sanctions on the administration of Zimbabwean President Robert Mugabe.

On 21 July, Zimbabwe Central Bank introduced a 100bln Zimbabwe dollar note. However, the note is not enough to buy even a loaf of bread. So, 100bln Zimbabwe dollars, which is equal to 1 USD, will be sufficient to buy only four oranges.

The notes, which have been issued by Zimbabwe Central Bank since 2003, are not banknotes, but bearer-cheque which period of validity is strictly restricted. So, 100bln Zimbabwe dollar notes will be valid by 31 December, 2008.

Economic situation in Zimbabwe can be called catastrophic. Majority of country's population (about 80%) are unemployed and live in poverty. The country is experiencing food and fuel shortage at the moment. People have no funds and no food.

Several millions of people have become refugees. Over three millions left the country. Harvest remained uncropped in the fields. Only production of diamonds and rich uranium deposits is the protection and direct profit source of the authorities. Industrial production of iron, gold, asbestos, coal, silver, nickel is underway in Zimbabwe, with gold being the most important.

Investors are leaving Zimbabwe. At the beginning of July, Royal Dutch Shell oil concern owned by UK/Netherlands left the country. The company sold 50% of its stocks (its Zimbabwe enterprise is joint with BP) to South-African Engen Petroleum due to dropping profitability. And those foreign companies which are still operating in the country sustain losses. For example, Apollo Tyres company, which purchased a tyre producing plant in Zimbabwe in April 2006, is still continuing the production (about 20,000 per day), receiving almost no profit.

Given a plenty of zeros in Zimbabwe dollars (which are used even for small payments), all banks in the country suspended operations on all plastic cards until the system is arranged. Cancellation of credit cards affected the number of tourists visiting Zimbabwe for its Victoria Falls, ruins of ancient towns and unique nature reserves. The period during which plastic card owners will not be able to use them in Zimbabwe is not reported.

Moreover, Zimbabwe is experiencing a political crisis. On 29 June, the country held presidential elections, legitimacy of which was questioned by all international watchdogs. Current head of state Robert Mugabe, who has been in power during 28 years, was announced the winner. Mugabe blames Western countries for his country's economic situation. He calls on his countrymen to charge the 'white criminals', who committed genocide of black people. Zimbabwe is blaming Sweden in particular, which refused to allot funds to the country for redemption of land from white farmers for its further distribution amongst black farmers. In fact, Swedish Government promised in 1980 to allot about $55mln for land reforms. A total of 90% of the sum was allocated by 1990, but then Sweden froze the funds, since Zimbabwean Government violated the agreement prohibiting application of compulsion towards farmers to make them sell their land to the State.

Zimbabwean opposition rejected the results of presidential elections. It blames Mugabe's administration for introducing the law stipulating for control over Zimbabwe-based foreign companies by the black population, which rapidly reduced foreign investments inflow and strongly struck Zimbabwe's economy.

An acute political crisis broke out in the country due to the differences and it is still ongoing, while international community is threatening Zimbabwe with sanctions. EU intends to refuse issuing of visas to over 130 Zimbabwe citizens and to freeze bank accounts. The time will show Zimbabwe's future.