Many fear the current crisis, induced by foreign currency shortages and a ballooning debt, could spiral into the kind of collapse seen a decade ago when Zimbabwe’s hyperinflation reached 500 billion percent, according to the International Monetary Fund.
Plastic bags of 100-trillion Zimbabwe dollar banknotes were not enough to buy basic groceries, forcing Mugabe to form a “unity government” with the opposition and adopt a multi-currency system.
Since then, daily transactions have been dominated by the US dollar. But the new currency shortage has forced most people to use a surrogate currency called bond notes, bank cards and mobile money, all of which are devaluing quickly against the US dollar on the black market.
Retailers said the soaring rates for US dollars on the black market, where they source most of their foreign currency, are making it difficult for them to restock. Some outlets such as fast-food chain KFC have been forced to close.
“The parallel market is unsustainably high and has decimated confidence. Prices have been going up while margins are eroded,” Denford Mutashu, president of the Retailers Association of Zimbabwe, said.
In the days leading to the implosion, new Finance Minister Mthuli Ncube, a former lecturer at the London School of Economics, announced the “stabilisation programme” that included commitments to cut borrowing. He also plans to cut government spending, repay foreign loans to unlock fresh credit and expand the revenue base.
On Friday, Ncube surprised many by announcing that after rebasing the gross domestic product and taking into account the large informal sector, Zimbabwe is now a middle-income economy.
“Our economy is bigger than we think,” he told reporters but warned of “pain” to achieve desired growth. “At the end, we will be glad.”
But Zimbabweans have reacted angrily to one of the new measures, a tax on transactions conducted with mobile money and bank cards. Labor unions and others say the poor, without access to US dollars and largely reliant on electronic transfers, will be hardest hit.
Protests have erupted, and more are planned this week, as people say they can’t endure the economic pain any longer.
The crisis could lead to social unrest unless a political settlement is reached between the ruling ZANU-PF party and the opposition, which narrowly lost the presidential election and unsuccessfully challenged the results in court, said Harare-based political analyst Alexander Rusero.
“ZANU-PF should swallow its pride to realize that they desperately need the opposition for the way forward,” Rusero said.
Both parties are instead playing hardball despite efforts by churches and others to bring them into negotiations.
Meanwhile, the popularity of the new President, who was cheered by thousands for replacing Mugabe, is dropping. Once-popular campaign slogans are being mocked.
The road to a more secure future in Zimbabwe is “long, winding and at times bumpy,” Mnangagwa replied in a statement posted on Twitter this week. “But there is no other way.” – The Africa Report