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Economy of Zimbabwe

From Academic Kids

Properly managed, Zimbabwe's wide range of resources should enable it to support continuing economic growth. The country has an important percentage of the world's known reserves of metallurgical-grade chromite. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, and iron ore.

However, its ongoing political turmoil and the world's highest rate of AIDS infection have greatly hampered its progress.

Contents

Two decades of growth, then slump

The Rhodesian economy experienced a modest boom in the early 1970s. Real per capita earnings for blacks and whites reached record highs, although the disparity in incomes between blacks and whites remained, with blacks earning only about one-tenth as much as whites. After 1975, however, Rhodesia's economy was undermined by the cumulative effects of sanctions, declining earnings from commodity exports, worsening guerilla conflict, and increasing white emigration. When Mozambique severed economic ties, the Ian Smith regime was forced to depend on South Africa for access to the outside world. Real gross domestic product (GDP) declined between 1974 and 1979, before full independence in 1980. An increasing proportion of the national budget (an estimated 30%-40% per year) was allocated to defense, and a large budget deficit raised the public debt burden substantially.

The manufacturing sector, already well-developed before the Unilateral Declaration of Independence (UDI) in 1965, was given a major stimulus by the imposition of United Nations sanctions. The sanctions obliged Rhodesian industry to diversify and create many import-substitution undertakings to compensate for loss of traditional sources of imports. Rhodesian processing of local raw materials also grew rapidly. Major growth industries included steel and steel products, heavy equipment, transportation equipment, ferrochrome, textiles, and food processing.

Following the Lancaster House Agreement in December 1979, the transition to majority rule in early 1980, and the lifting of sanctions, Zimbabwe enjoyed a brisk economic recovery. Real growth for 1980-1981 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However it slumped in 1986 to a zero growth rate and registered negative of about minus 3% in 1987 due primarily to drought and foreign exchange crisis faced by the country. Growth in 1988-1990 averaged about 4.5%.

In recent times Robert Mugabe's policies towards land reform have led to internal upheaval and population displacement, high inflation, and an inability of the country to feed itself.

Infrastructure and resources

Zimbabwe has adequate internal transportation and electrical power networks. Paved roads link the major urban and industrial centres, and rail lines managed by the National Railways of Zimbabwe tie it into an extensive central African railroad network with all its neighbours. In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River but augmented since 1983 by large thermal plants adjacent to the Wankie coal field. The telephone service is problematic, and new lines are difficult to obtain.

With considerable hydroelectric power and plentiful coal deposits for thermal power stations, Zimbabwe is less dependent on oil as an energy source than most other comparably industrialized countries. Only about 15% of Zimbabwe's total energy consumption is accounted for by oil, all of which is imported. Zimbabwe imports about 1.2 billion liters per year. Dependence on petroleum is managed through the price controls for vehicle fuels, the use of gasohol, and the substitution of diesel-electric locomotives on the railway system. Zimbabwe also has substantial coal reserves that are utilized for power generation, and recently discovered in Matabeleland province are coalbed methane deposits greater than any known natural gas field in Southern or Eastern Africa. In recent years, poor economic management and low foreign currency reserves have led to serious fuel shortages.

Agriculture is the backbone of the Zimbabwean economy. Maize is the largest crop. Tobacco is the largest export crop followed by cotton. The government's controversial land reform efforts starting in 2000 have disrupted a significant portion of the commercial farm economy, leading to a sharp drop in tobacco, corn, and cotton production. Poor government management has exacerbated meager harvests caused by drought and floods, resulting in significant food shortfalls beginning in 2001.

Effects of political turmoil on the economy

In recent years, poor management of the economy and political turmoil has led to considerable economic hardship. The Government of Zimbabwe's chaotic land reform program, recurrent interference with, and intimidation of, the judiciary, as well as maintenance of unrealistic price controls and exchange rates has led to a sharp drop in investor confidence. Since 2000, the national economy has contracted by as much as 25%; inflation has vaulted over 400%; and there have been persistent shortages of foreign exchange, local currency, fuel, and food. Direct foreign investment has all but evaporated. Billions were spent in the country's involvement in the war in the Democratic Republic of the Congo.

As of February 2004, Zimbabwe's foreign debt repayments have ceased, resulting in compulsory expulsion from the International Monetary Fund (IMF). This, and the United Nations World Food Programme stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources.

Economic data

GDP: purchasing power parity - $24.37 billion (2004 est.)

GDP - real growth rate: -8.2% (2004 est.)

GDP - per capita: purchasing power parity - $1,900 (2004 est.)

GDP - composition by sector: agriculture: 17.3% (2003) industry: 24.5% (2003) services: 58.3% (2003)

Population below poverty line: 70% (2002 est.)

Household income or consumption by percentage share: lowest 10%: 1.97% (1995), 1.8% (1990) highest 10%: 40.42%(1990), 46.9% (1990)

Distribution of family income - Gini index: 50.1 (1995)

Inflation rate (consumer prices): 133% (2004 est.)

Labor force: 4.23 million (2004 est.)

Labor force - by occupation: agriculture 66%, services 24%, industry 10% (1996 est.)

Unemployment rate: 70% (2002 est.), 50% (1999 est.)

Budget: revenues: $1.325 billion (2003) expenditures: $1.593 billion (2003) including capital expenditures of $NA (2003)

Industries: mining (coal, gold, copper, nickel, tin, clay, numerous metallic and nonmetallic ores), steel, wood products, cement, chemicals, fertilizer, clothing and footwear, foodstuffs, beverages

Industrial production growth rate: -7.8% (2004 est.)

Electricity - production: 8,839 GWh (2002), 6.97 TWh (1998)

Electricity - production by source: fossil fuel: 47% (2001) 78.19% (1998) hydro: 53% (2001), 21.81% (1998) nuclear: 0% other: 0%

Electricity - consumption: 9,813 GWh (2001), 8.403 TWh (1998)

Electricity - exports: 0 TWh (2001,1998)

Electricity - imports: 3,550 GWh (2001), 1.921 TWh (1998)

Oil - production: 0 barrel/day (2001 est.)

Oil - consumption: 23,000 barrel/day (3,700 m³) 2001

Agriculture - products: maize, cotton, tobacco, wheat, coffee, sugarcane, peanuts; cattle, sheep, goats, pigs

Exports: $1.409 billion f.o.b. (2004 est.)

Exports - commodities: tobacco, gold, ferroalloys, textiles/clothing

Exports - partners: South Africa 6.4%, China 5.6%, Germany 4.9%, Japan 4.7% (2003 est.)

Imports: $1.599 billion f.o.b. (2004 est.)

Imports - commodities: machinery and transport equipment, other manufactures, chemicals, fuels

Imports - partners: South Africa 51.3%, Democratic Republic of the Congo 6.1%, Germany 2.8% (2003 est.)

Debt - external: $4.086 billion (2003 est.)

Economic aid - recipient: $178 million; note - the EU and the US provide food aid on humanitarian grounds (2000 est.)

Currency: 1 Zimbabwean dollar (Z$) = 100 cents

Official exchange rates: Zimbabwean dollars per US dollar - NA (2003), 55.0358 (2002), 55.0521 (2001), 44.4179 (2000), 38.3012 (1999); note - these are official exchange rates, non-official rates vary significantly

As of June 2005, the black market rate was 25,000 to the US dollar.

Fiscal year: 1 January - 31 December

See also

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