Zimbabwe Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economical overview

The mining sector and agriculture form the basis of Zimbabwe’s economy. After a decade of decline as the economy shrank by more than 40 percent and the state approached a collapse, a reversal came in 2009. In a few years, the economy grew by over 10 percent a year, but from 2013, growth has slowed again.

Hundreds of thousands of Zimbabweans depend on food aid or risk being hungry in the event of a poor corn harvest. The country has problems with a low level of investment, lagging infrastructure, widespread corruption, high foreign debt and continued political uncertainty.

Countryaah.com: Major imports by Zimbabwe, covering a full list of top products imported by the country and trade value for each product category.

Basically, Zimbabwe has a broad economic base, compared to all neighboring countries except South Africa, and at independence in 1980, the conditions for economic development were good. The country was richly equipped with gold and other natural resources. The infrastructure, agriculture and manufacturing industries were well developed. Despite the government’s socialist ideology, a pragmatic economic policy was pursued with few nationalizations and a cautious land reform. Large investments were made in education, health care and other community services.

But after a few years, the problems began to accumulate. Drought caused bad harvests, while export prices fell and the political situation was troubled by the uprising in Matabeleland (see Modern History). Exports decreased and inflation rose. Corruption and abuse of power spread within the state administration. Large social initiatives, widespread benefits to ministers and high defense spending forced the government to take out large loans abroad.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ZI which represents the country of Zimbabwe. Check findjobdescriptions to learn more about Zimbabwe.

The economy is shrinking

The debt combined with large budget deficits laid the foundation for a deep economic crisis. President Mugabe was forced to turn to the International Monetary Fund (IMF) and the World Bank for financial support in 1990. In return, austerity and deregulation of the economy were implemented. The cost of Zimbabwe’s involvement in the war in the Congo-Kinshasa 1998–2002 (see Modern History) caused the crisis to worsen dramatically. In 1999, the Zimbabwean economy began to shrink and the country fell into a downward spiral. The World Bank and the IMF withheld their assistance, as the government did not manage the repayments on the loans. The state-sponsored violence against the opposition also caused Zimbabwe to lose bilateral aid (see Foreign Policy and Defense).

Criticism against Mugabe increased, which contributed to his decision to push for land reform (see Modern History and  Agriculture and Fisheries). The violent phase of 2000–2002 became a fundamental shot against the economy: food production collapsed as well as income from food exports. After the land reform, large parts of the formerly important commercial agriculture lay in the trough and hundreds of thousands of farm workers went unemployed. Other economic sectors, such as industry and mining, were seriously disturbed by the political turmoil and produced well below their capacity. Several millions of people depended on food aid to avoid famine. Extensive corruption in the public administration helped to erode the economy.

Hyperinflation

In order to be able to pay central government expenditure, the central bank began to print more money. Prices continued to rise. In 2007, inflation was out of control and was several thousand percent. There was widespread lack of food and fuels. Much of the official economic activity had ceased and unemployment was estimated at upwards of 95 percent. Several millions of Zimbabweans had fled the country. During 2008, hyperinflation became galloping. Zeros were cleared from the currency several times. In the end, the price increase rate was so high that prices doubled in about a day. In July, inflation was at a palpable 231 million percent year-on-year, and then the government stopped reporting figures. The situation became even worse during the autumn, with prices estimated to have risen most by close to 80 billion per month.

At the same time, the country’s political crisis had culminated in the disputed election that led to the agreement on the division of power in September (see Modern History).

The unifying government took office in February 2009 and the same month the government decided to give up attempts to defend the Zimbabwean dollar. It was allowed to use other currencies, which in practice the Zimbabweans have already done for a long time. At that point, the salary of a teacher, doctor or government employee was not enough to take the bus to work.

When, among other things, the US dollar was officially allowed, prices immediately began to fall, and hyperinflation stopped. The IMF opened to lend money to Zimbabwe for the first time since 2000. Several Western countries also pledged aid for reconstruction, and China alone provided $ 950 million.

Investors hesitate

The situation stabilized significantly financially. But the upturn was based on a very low level. The race that Zimbabwe has undergone was unusual for a country that is not at war or has suffered any other external disaster. The large external debt accounted for a severe downturn and, five years later, was still above 100 per cent of gross domestic product (GDP).

Foreign investors remain hesitant to invest in Zimbabwe. A law that meant that black Zimbabweans must own at least 51 percent of companies with assets worth at least half a million US dollars created long-term uncertainty. It was unclear how the law would be applied and it was scrapped in 2018 and 2019.

After the 2013 elections, some of the sanctions have been removed and Zimbabwe has been given the go-ahead for both the International Monetary Fund (IMF), for the first time in ten years, and from the EU. Inflation has remained below 5 percent since 2009 and there is no risk of a new galloping price increase since the Zimbabwean dollar was also formally abolished in 2015. At the same time, the growth rate fell, after being around 3 percent for a couple of years.

Corruption is a difficult problem. According to the National Audit Office, the state lost about $ 2 billion in 2012 due to corruption. In 2014, Zimbabwe ranked 156th out of 175 in the organization Transparancy International’s ranking of the world’s countries on corruption.