The Daily News (Harare)
Dave Goldiner
4 November 2002
New York — The International Monetary Fund (IMF)'s top expert on Zimbabwe says the country is on the brink of an economic crisis that will make the current hardships seem like child's play.
Gerry Johnson, the IMF's resident representative to Zimbabwe, said government mismanagement could soon plunge the nation into a hyperinflationary spiral that would bring the economy to its knees - possibly before year's end.
The group predicts inflation of 522 percent for next year, but Johnson now says prices could soar much, much more than that.
"You're moving into a situation where it could go much higher than that," said Johnson, who is in the United States of America for consultations.
"Once you get to that point, it can go very fast."
A dramatically accelerating crisis could force companies to shut down nationwide and prices doubling on a monthly basis - just as the nation struggles with a catastrophic famine.
Workers' already shrivelling salaries would be rendered worthless overnight and the Zimbabwean dollar would collapse to never-imagined lows.
"One does wonder how much longer can the economy be allowed to collapse," said Johnson, who returns to Harare this week. "I don't know at what point people in government start to realise that something has to happen."
The Zanu PF government is the culprit for creating the three-headed monster of declining production in all sectors, artificially low interest rates, and a fictitious fixed foreign exchange rate, Johnson said.
Especially with the tobacco selling season over, Zimbabweans are likely to continue to scramble to buy the increasingly scarce foreign currency at any price.
With interest rates being held at absurdly low rates, there is no incentive for anyone to hold onto Zimbabwean dollars any longer than they have to.
"People have no confidence in the economy," Johnson said. "They are nervous and they are probably right to be nervous."
Johnson, who has been stationed in Harare for 18 months, was shocked to hear from a reporter that the Zimbabwean dollar was trading late last week at Z$1 400 to the United States dollar - a dramatic fall from its level when he left the country just the previous week.
He said the Zimbabwean dollar could quickly plunge to 3 000 or more to the US dollar and will likely be trading below parity with the Zambian kwacha next year - a humiliating blow to the Zanu PF government.
Zimbabwe has rejected the IMF's prescriptions for economic recovery and refused to service its debt. It recently had its voting rights suspended by the world financial body, a step short of being expelled.
Short of restoring the rule of law, the best hope to restore some semblance of economic sanity would be to raise interest rates, Johnson said.
That would bring down inflation to manageable levels and give Zimbabweans some incentive to save or invest Zimbabwean dollars instead of spending them or bidding for foreign currency.
Johnson said every economist knows the country can only escape an economic meltdown with new assistance from the international lending agencies like the IMF and World Bank.
But he said it will take more than a phone call from President Mugabe to win an economic life raft from the Bretton Woods group.
Mugabe would have to reverse the international pariah status he has earned by years of farm seizures, the stolen presidential election and broken promises to ease political repression.
"The lender countries are concerned that the people of Zimbabwe are suffering greatly," Johnson said.
"They want to see change and so do we."
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