Zimbabwe’s deepening crisis
A ruined country is waiting for its elderly dictator to go
A MONEY-CHANGER deftly flicks through a brick of bills, her fingernails a sparkly purple that matches her eye-shadow. She keeps the stack of “bond notes” (Zimbabwe’s ersatz money) bundled inside a sock in a plastic carrier bag. Real American dollars are hidden in her bra. Although bond notes are officially worth the same as American dollars, here on a pavement in Harare, the capital, greenbacks trade at a premium of 20-30% to the bills printed by Mr Mugabe’s government. Those wanting to buy dollar bills with mobile money, which is also supposedly denominated in the American currency, must pay a further premium of 30%.
Such a range of values for Zimbabwe’s money ought not to be possible since, officially at least, it does not have a currency. The country adopted the American dollar almost a decade ago after the central bank’s profligate printing of Zimbabwe dollars led to hyperinflation that peaked at 500,000,000,000%. At the time, notes with a face value of 100trn Zimbabwe dollars could barely pay for a loaf of bread.
Yet last year, when the government found it could no longer pay its bills using real dollars, it started issuing bond notes, claiming they were interchangeable. So insistent is it in this assertion that it has outlawed the street trading of ersatz dollars for the real thing: money-changers can face a decade behind bars if convicted. But this money-changer says that some of her best customers are government officials who hoover up greenbacks to spend or stash abroad. The value of real dollars spikes whenever Robert Mugabe, who has ruled Zimbabwe since its independence in 1980, goes abroad with his bloated entourage. “As long as there are bond notes, they will never stop us hustlers,” says the money-changer. “They need us. We are the people who are running the economy.”
After nearly two decades of lurching from one economic crisis to the next, life in Zimbabwe somehow still grinds on. Mr Mugabe, old and frail, presides over a fragile economy yet still controls his party, Zanu-PF. At 93, he is running yet again for president, with an election planned for the first half of next year. Though physically weak and forgetful (in 2015 he read the same speech in parliament twice) he still plays factions of the party off against each other to stay in control.
At a party conference in December he is expected to strengthen a faction aligned with his wife, Grace, at the expense of Emmerson Mnangagwa, who previously ran the security services and had been Mr Mugabe’s presumed successor. Mr Mnangagwa, one of two vice-presidents, lost his post as justice minister in a recent cabinet shuffle. “When you become a threat to the centre of power, he disposes of you,” says Temba Mliswa, an independent member of parliament and former Zanu-PF provincial chairman who is considered close to Mr Mnangagwa. Mr Mugabe “is very old but he still understands power”.
Most Zimbabweans think nothing will change until Mr Mugabe dies. In the meantime they must scramble and adapt to survive. As many as 95% of working people hustle for a living in the informal sector. On the streets one finds professionals and graduates working as unlicensed traders. Sten Zvorwadza, who leads a street-vendors’ union, reckons there are 100,000 such traders in Harare.
Some sell goods in the tiniest of quantities—a squeeze of toothpaste, a teaspoon of sugar—because that is all many buyers can afford. Mr Mugabe thinks hawkers make the city look dirty, and wants them moved to a dusty patch in a depressed industrial area of Harare where there would be fewer customers. Riot police known as “black boots” have used water cannons to try to remove the hawkers. But they are fighting back. “Not a vendor by choice,” says a sign posted in central Harare. “If not this, what?” says another.
Everywhere you feel a sense of impending economic collapse. Many in the country fret that hyperinflation will return, fuelled by the government’s printing of electronic dollars. Since it cannot get real ones, and is running large fiscal deficits (about 8% of GDP last year and probably more this year) it has been issuing dollar-denominated treasury bills, or IOUs, to banks. The banks in turn credit it with electronic dollars, which it uses to pay civil servants, whose wages consume about 90% of government revenues. But that money cannot be withdrawn.
The queues that once snaked around the block outside banks have disappeared, but only because there is hardly any cash to be had. Nearly everyone pays with swipe cards linked to Zimbabwean bank accounts, or EcoCash, a popular form of mobile money. But the lack of foreign exchange means that imports may become scarce. In late September a shiver of panic over shortages of food and fuel rippled through the capital, sparking a round of panic-buying. And prices are rising.
John Robertson, an economist, reckons that the money supply expanded by 36% in the 12 months to August, six times more than the rate a few years earlier. “What’s behind that money? Nothing,” says Rob Davies, another economist in Harare. “It’s a Ponzi scheme.”
In October Mr Mugabe replaced his pragmatic finance minister, Patrick Chinamasa, with a loyalist. Mr Chinamasa lost his job while attending the annual meetings of the World Bank and International Monetary Fund where he was pleading for debt relief and new loans to restart the economy. Zimbabwe is unlikely to get either as long as Mr Mugabe is in charge.
Such a range of values for Zimbabwe’s money ought not to be possible since, officially at least, it does not have a currency. The country adopted the American dollar almost a decade ago after the central bank’s profligate printing of Zimbabwe dollars led to hyperinflation that peaked at 500,000,000,000%. At the time, notes with a face value of 100trn Zimbabwe dollars could barely pay for a loaf of bread.
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After nearly two decades of lurching from one economic crisis to the next, life in Zimbabwe somehow still grinds on. Mr Mugabe, old and frail, presides over a fragile economy yet still controls his party, Zanu-PF. At 93, he is running yet again for president, with an election planned for the first half of next year. Though physically weak and forgetful (in 2015 he read the same speech in parliament twice) he still plays factions of the party off against each other to stay in control.
At a party conference in December he is expected to strengthen a faction aligned with his wife, Grace, at the expense of Emmerson Mnangagwa, who previously ran the security services and had been Mr Mugabe’s presumed successor. Mr Mnangagwa, one of two vice-presidents, lost his post as justice minister in a recent cabinet shuffle. “When you become a threat to the centre of power, he disposes of you,” says Temba Mliswa, an independent member of parliament and former Zanu-PF provincial chairman who is considered close to Mr Mnangagwa. Mr Mugabe “is very old but he still understands power”.
Most Zimbabweans think nothing will change until Mr Mugabe dies. In the meantime they must scramble and adapt to survive. As many as 95% of working people hustle for a living in the informal sector. On the streets one finds professionals and graduates working as unlicensed traders. Sten Zvorwadza, who leads a street-vendors’ union, reckons there are 100,000 such traders in Harare.
Some sell goods in the tiniest of quantities—a squeeze of toothpaste, a teaspoon of sugar—because that is all many buyers can afford. Mr Mugabe thinks hawkers make the city look dirty, and wants them moved to a dusty patch in a depressed industrial area of Harare where there would be fewer customers. Riot police known as “black boots” have used water cannons to try to remove the hawkers. But they are fighting back. “Not a vendor by choice,” says a sign posted in central Harare. “If not this, what?” says another.
Everywhere you feel a sense of impending economic collapse. Many in the country fret that hyperinflation will return, fuelled by the government’s printing of electronic dollars. Since it cannot get real ones, and is running large fiscal deficits (about 8% of GDP last year and probably more this year) it has been issuing dollar-denominated treasury bills, or IOUs, to banks. The banks in turn credit it with electronic dollars, which it uses to pay civil servants, whose wages consume about 90% of government revenues. But that money cannot be withdrawn.
The queues that once snaked around the block outside banks have disappeared, but only because there is hardly any cash to be had. Nearly everyone pays with swipe cards linked to Zimbabwean bank accounts, or EcoCash, a popular form of mobile money. But the lack of foreign exchange means that imports may become scarce. In late September a shiver of panic over shortages of food and fuel rippled through the capital, sparking a round of panic-buying. And prices are rising.
John Robertson, an economist, reckons that the money supply expanded by 36% in the 12 months to August, six times more than the rate a few years earlier. “What’s behind that money? Nothing,” says Rob Davies, another economist in Harare. “It’s a Ponzi scheme.”
In October Mr Mugabe replaced his pragmatic finance minister, Patrick Chinamasa, with a loyalist. Mr Chinamasa lost his job while attending the annual meetings of the World Bank and International Monetary Fund where he was pleading for debt relief and new loans to restart the economy. Zimbabwe is unlikely to get either as long as Mr Mugabe is in charge.
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