Zimbabwe Reaches ‘Tipping Point’ as Inflation Blacked Out

Zimbabwe’s finance minister responded to the country’s worsening economic crisis last week by blacking out inflation statistics for the next six months, boosting the price of the little power that’s available five-fold and admitting what the International Monetary Fund told him in April: the economy will contract for the first time since 2008.

{snip} This all happened in a country with daily power cuts of up to 18 hours and shortages of everything from bread to motor fuel. People are receiving food aid in cities for the first time and a drought has necessitated the import of hundreds of thousands of tons of corn.

When Robert Mugabe was ousted after four decades in power in late 2017 his replacement, Emmerson Mnangagwa, promised economic regeneration and declared that Zimbabwe is “open for business.” Instead things have gone from bad to worse with the effects of rapidly expanding money supply through the sale of Treasury bills under Mugabe’s rule coming home to roost and this year’s outlawing of the U.S. dollar in favor of a local quasi currency that can’t be traded outside the country causing panic.

“Zimbabwe is at a tipping point and if it falls over the edge it’s going to be quite a long way in coming back,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. {snip}

The country with the world’s highest inflation rate after Venezuela also suspended annual consumer-price data for the next six months. {snip}

If the more commonly used black-market exchange rate is used, Zimbabwe’s annual inflation is currently 558%, about three times the official rate, while Venezuela’s is 35,004%, according to Steve H. Hanke, a professor of applied economics at the Johns Hopkins University in Baltimore.

{snip}

The fundamental problem is that the government has failed to attract significant investment and hasn’t substantially changed the policies of the Mugabe era, said John Robertson, an independent economist in Harare, the capital.

{snip}