Mugabe’s Economic Policies and Poverty in Zimbabwe


HARARE, Zimbabwe — With 21 percent of the population living at $1.90 per day and more than 72 percent below the relative poverty line according to 2011 World Bank data, Zimbabwe is one of the poorest countries in the world. In large parts of the country, poverty in Zimbabwe can be accredited to the failing economic policies under the authoritarian government of President Robert Mugabe.

Mugabe has been in power for more than three decades since Zimbabwe gained its independence in 1980. In the late 1990s, the first of a long streak of poor economic policy decisions were made, giving way to hyperinflation and economic collapse. In an effort to regain public support, Mugabe granted payouts to war veterans, inflating the budget by 55 percent between 1996 and 1997.

In 1997, Mugabe also announced his plans for land reform without a plan to finance it. This led to a panic among investors and ultimately to the crash of the Zimbabwean dollar. The government’s response, implementing price controls, proved to be ineffective to protect the population’s living standard. In 1998, Zimbabwe’s costly participation in the Second Congo War put further pressure on the currency.

In 2000, the implementation of Mugabe’s land reform policy started. White-owned farmland was seized and redistributed to the benefit of senior ruling party officials and small producers. Because of a lack of experience and funding the land’s recipients were often unable to farm the lands effectively. The reforms resulted in a collapse of the economy. Agricultural output dropped by more than 50 percent between 2000 and 2013. In recent years, droughts and torrential rain have added to the crisis.

The inflation of the Zimbabwean currency escalated in the first years of the new century, as the government continued to print money. The inflation rate peaked in 2008 at 231 million percent. The government reacted by legalizing the use foreign currencies and suspending the Zimbabwean dollar. The U.S. dollar is now the main currency used in Zimbabwe. This had a stabilizing effect on the economy and led to an episode of remarkable GDP growth of 11 percent in 2010.

Unfortunately, the economic growth did not last. Shifts in trade along with droughts led to yet another downturn. In 2016, the GDP growth rate had dropped to 0.6 percent. Because of the imbalance of imports and exports, currency flows out of the country and the economy is crippled by a severe cash shortage. Productivity continues to drop. Foreign investment is desperately needed to bring foreign currency into Zimbabwe and stimulate the economy.

The economist Steve Hanke fears that the Zimbabwean economy might “turn into a death spiral”, as he told Bloomberg. He also criticizes the government’s latest strategy to hand out bond notes, a proxy currency, to ease the cash shortage. “More bond notes will only add fuel to the demand for hoarding of what is viewed as being the superior currency and store of value in Zimbabwe, the U.S. dollar,” Hanke said.

While extreme poverty in Zimbabwe dropped during the economic upturn, it is most likely on the rise again, according to the World Bank. The Global Hunger Index states that a third of the Zimbabwean population was undernourished in 2016.

Although the president, at age 92, is determined to stay in power after next year’s election, Zimbabweans start to think about a future under a new government. There is fear of a leadership conflict and its potentially destabilizing effect on the political and economic system. But a shift in power is also anticipated hopefully as a new chance by many.

According to the World Bank, Zimbabwe has “enormous potential” due to its natural resources, relatively skilled inhabitants and infrastructure. To unleash this potential, stimulate economic growth and end poverty in Zimbabwe, the government will have to conduct comprehensive reforms in monetary, fiscal and investment policies and resolve debts to international lenders.

Lena Riebl

Photo: Flickr


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