Three months later: A look at Zim's tank economy


By Kuda Chideme

The country's largest gold producer is on the verge of collapse because of the government's distorted foreign currency retention policy; the cost of bread has risen more than threefold in just one month as the livestock industry warns of imminent meat shortages because of the exorbitant costs of animal feed.

All this happened only in the first three months of the year.

Within those few months, the International Monetary Fund (IMF) was also to nullify its initial growth forecast for Zimbabwe, warning that the country's economy would contract up to 5.2% by the end of the year.

For the tenth consecutive month, year-on-year inflation is on the rise, reaching a staggering 66.8% in March 2019. According to them, the statistics agency did not change the matrix used to calculate the Consumer Price Index. (CPI), the year-on-year inflation in March would have been confounding 166%.

That would not be far behind Professor Steve Hanke's projections, which put the country's inflation in the region at 200 percent, second only to Venezuela, which is chasing the record we set a decade ago.

Meanwhile, foreign currency, as well as confidence, is missing.

Two of the country's top tobacco and gold producers perform below expectations, as a result of government error.

The tobacco season began on a very poor note, as sales continue to be hampered by disputes between merchants and farmers over payment terms. Farmers want to be paid in US dollars for their products, but the central bank refuses to oblige. Traders also want loans granted to farmers to be paid in dollars, but the central bank has ruled otherwise.

According to statistics from the Tobacco Industry Marketing Board (TIMB), tobacco deliveries fell about 52 percent to 17.5 million pounds in the first 20 days of trade, while the value of tobacco sold at $ 30, 3 million fell 70% over the same period last year.

The implications of this for a sick economy that is desperate for foreign currency could never be overstated, considering that last year the tobacco industry alone generated about one billion dollars in foreign earnings.

On the other hand, deliveries of gold to Fidelity Printers and Refiners in the first quarter fell about 10% from last year's production.

With the country's largest gold producer, Metallon Corporation, facing challenges of viability, it is best to nullify all hopes of reaching the 40-ton gold target. In fact, we may not even reach 33 tons last year.

In fact, the company that had long-term plans to expand and increase production to 500,000 ounces of gold per year by 2021, from the 120,000 ounces it used to produce from all of its mines, could simply double.

With growing debts, the company has called for judicial administration to protect its assets from being confiscated by creditors.

The sentiment of the investor is weak and the movements of foreign capital that have been anticipated are far from being seen. Instead, the country is witnessing the massive flight of capital as companies find it hard and bend.

The decision to float the RTGS did not bring much relief to the industry seeking a liberalized foreign currency market.

On Friday, the RTGS dollar was trading at 3.19 per dollar in the interbank market, while it fell to 1: 5 in the parallel market.

"Goodwill between the US dollar and the RTGS dollar continues to increase in the parallel market, thus remaining an albatross around the neck of the economy as cost pressures continue to grow. Our view is that the interbank market remains incapable of dealing decisively with the massive demand for foreign currency, since the supply side remains under pressure. As long as exports and investment inflows remain weak, the supply side will remain under pressure, threatening the expected convergence between the interbank rate and the parallel market rate, "says a recent MMC Capital report.

"Our view is that there will be very small growth this year, mainly due to the scarcity of foreign currency, reducing the efforts of the local industry to reequip. The below-par agricultural season will also negatively impact growth, as output is relatively low. We also fear that retention rates in the mining sector will not adequately attract the production of small-scale miners. "

Not to rejoice, but we saw it coming.

Now that we are here, we ask how much worse things will be. If history has taught us anything, things can always get worse, even when it seems impossible.

With all the indicators pointing to the south, it seems like it's only a matter of time before we improve our own record for the worst economy in the world.


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