According to the Institute of Security Studies (ISS), for Zimbabwe, it doesn’t seem to be any short-term solution for its weakening economy.
Zimbabwe has a debt of over US$10 billion and is also in short of foreign currency.
“That there is more to come is certain,” Senior Research Consultant Derek Matyszak says. “Zimbabwe’s problems are rooted in Mugabe’s profligacy and disastrous economic policies.”
“From 2013, the government clocked up massive budget deficits. They were funded by the prolific issuance of treasury bills. Unable to pay these bills on maturity, the government resorted to the simple (albeit unlawful) expedient of ordering the Reserve Bank to make book entries into the credit columns of banks holding the maturing bills.”
The Research consultant also commented on the way in which Zimbabwe opened the year 2019.
“Zimbabweans in formal employment and paid electronic money have found it impossible to make ends meet,” Matyszak says.
“The year began with strikes by civil servants for salary increments.”
“These salary increases can only be paid through the issuance of more treasury bills, and a resultant further decline in the purchasing power of the improved salaries, returning workers to square one or worse.”
ISS article also commented on the erosion of buying power in Zimbabwe.
“Although officially denominated as US dollars, electronic money has inevitably declined in value against real money,” Matyszak says.
“Before the recent protests, it traded at about 3.4 electronic dollars to one real US dollar cash. Imports, of course, must be paid in real dollars.”
“That means a 3.4-fold increase in the price of imported products paid for by consumers in electronic money, and a sharp erosion of the purchasing power of worker salaries received in electronic money,” explains Matyszak.
Despite engagement programs with the international community, Zimbabwe has failed to secure funds that can drive the economy back to stability.
“Government feels it can do no more than to sit heavily on the boiling pot,” Matyszak says. “Expect to see it boiling over in the months to come.”
