February 10, 2011

Economy of Zimbabwe

[source: wikipedia]

The economy of Zimbabwe has shrunk significantly after 2000, resulting in a desperate situation for the country and widespread poverty from among others 94% unemployment. The participation from 1998 to 2002 in the war in the Democratic Republic of the Congo set the stage for this deterioration by draining the country for hundreds of millions of dollars. Hyperinflation has been a major problem from about 2003 to April 2009, when the country suspended its own currency. The economy deteriorated from one of Africa's strongest economies to the world's worst.

The country has reserves of metallurgical-grade chromite. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, platinum and iron ore. Historically the country had farming and tourism as its other main industries.

Since 2000 the Zimbabwean government has taken most of the farmland previously used by commercial farmers (mostly white) and reallocated it. Most of this happened in a corrupt way and land went to politicians from ZANU-PF, military leaders or leaders in the police forces. These persons were usually inexperienced or uninterested in farming, and could not maintain the intensive, industrialized farming of the previous owners. Short term gains were often made by selling the farms equipment. The loss of agricultural expertise also triggered a loss of agricultural financing and market confidence which made recovery almost impossible. A considerable amount of this land has however gone to local peopole who use it mainly for subsistence farming. Therefore production of staple food, such as maize has not suffered as much as typical export crops, such as tobacco or coffee. The previously large exports of tobacco, cotton, soya and horticulutural produce have consequently reduced dramatically and the income derived from them lost to the national economy.

Government spending is 97.8% of GDP. It has partly been financed by printing money, which has led to hyperinflation. State enterprises are strongly subsidized, taxes and tariffs are high. State regulation is costly to companies, starting or closing a business is slow and costly. Labor market is highly regulated, hiring a worker is cumbersome, firing a worker is difficult and unemployment has risen to 94% (at the end of 2008; the figure was 80% in 2005).

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