On Friday, Zimbabwe will mark its 34th Independence Day. It has few reasons to celebrate. In March, the country recorded deflation for the first time since adopting multiple currencies in 2009: Zimbabwe’s annual inflation in dropped to -0.91% last month. Even more telling is the 12-month inflation rate downward trend, which decelerated from 2.9% at end-2012 to 0.3% at end-2013. At the same time, consumer spending is falling by the hour: sales of consumer goods fell by as much as 30% in February.
And the economic outlook is even gloomier with a growing warning that the country is close to an imminent economic collapse. According to the International Monetary Fund, “real GDP in 2013 is estimated at just above 3%, sharply down from 10.5% in 2012.” The commemoration of the independence will also mark 34 years since President Robert Mugabe and his Zanu-PF party took over power — and they haven’t let go of it.
A profound cash crunch is the landlocked country’s main problem: total tax revenue collections for the month of January 2014 were at $266.6 million, lower than the target of $278.6 million. The vast economic problems don’t stop there. The nation’s capital flight issue is off the charts since last year’s elections: about $1.5 billion has fled the stock market and about $1 billion more left the banking sector, with more dollars expected to flee according to Zimbawean opposition party MDC-T legislator Eddie Cross.
Meanwhile the stock market performance sings the same song: The Zimbabwe Stock Exchange industrial index closed the first quarter of 2014 at negative 12.8%, weak market demand and poor corporate earnings being the prime reasons. Finally, exports, a strong growth engine for the country, are also in a downward spiral.
The country’s 34th Independence celebrations will be held under a theme that is mismatched with reality: “Zimbabwe @34: Defending Our Sovereignty and Providing an Enabling Environment for Sustainable Economic Empowerment and Social Transformation”. The government has done little to enable economic growth and society is getting more and more frustrated — and the belief that independence hasn’t translated into anything tangible in their lives is gathering ever more adherents.
Deflation is likely to persist in the country for months, at least until efficient policies are put in place to boost national demand — something that seems, at the moment, miles away. If the country is serious about its 6.1% growth target for 2014, it needs to come up with ways to boost its coffers and promote greater national and international investment. If not, Zimbabwe will be staring blearily at a very grim economic prospect the day after the big party.