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Tue, 31 March 2015 12:17:21
Zimbabwe grows 9.4-pct in 2011, inflation 4.9-pct
28 Sep, 2012 13:57:43
Sept 27, 2012 (LBO) - Zimbabwe's inflation fell to 4.9 percent and the economy grew 9.4 percent in 2011, on the back of 9.6 percent growth in 2010 after a money monopoly of its hyperinflating central bank was broken, International Monetary Fund data shows.
But growth is expected to slow to 5.0 percent in 2012 amid state overspending which is crowding out citizens.

The IMF said in a public information notice that Zimbabwe's economic stabilization and recovery began with the end of hyperinflation in 2009, and "the adoption of the multicurrency system.

Cash budgeting had begun and quasi-fiscal activities by the Reserve Bank of Zimbabwe (RBZ) and also ended.

Multi Currency

A multi currency monetary system breaks the state monopoly on money creating competition in money depriving the ability of the Central Bank to force people to use its inflating currency and print money to either finance the government or state agencies.

The constraint forces rulers to make to with the taxes that people can pay (cash budgeting) and the central bank to end monetizing debt.

A money monopoly is enforced with the use of 'legal tender' laws which criminalizes citizne's use or denomination of goods and services by the currency of less inflating central banks and forcing citizens to pay taxes and other state dues in the inflating domestic currency.

The Reserve Bank of Zimbabwe created hyper inflation by printing large volumes of Zimbabwe dollars, and funding agriculture and other activities (quasi-fiscal) through re-financing schemes giving a hyper 'stimulus' to the economy.

In 2009 Zimbabwe deflated by 7.7 percent amid a global credit crunch that sent commodity prices plunging and its economy grew 6.3 percent.

Recent Trends

The IMF said by June 2012 Zimbabwe's inflation had slowed to 4.0 pecent from 4.9 percent in December 2011.

Despite cash budgeting, rulers had run domestic payment areas of 1.0 percent of gross domestic product in 2011. A 22 percent salary increase had been given to state workers and rulers had also recruited new people.

The country had also spent Special Drawing rights.

Zimbabwe is expected to end 2012 with 6.5 percent inflation and the economic growth to slow to 5.0 percent. "In response to the fiscal slippages, in July the government announced expenditure and revenue measures, as well as a reassessment of diamond revenue flows," an IMF public inflation notice said.

"The measures include a hiring freeze, suspension of a number of diamond-revenue-financed projects, increases in excises on fuel, and enhanced monitoring of the mineral resources."

IMF executive director urged Zimbabwe to tighten fiscal gaps.

"They underscored the need to rebalance the expenditure mix, especially by containing the growth of the wage bill, to create the fiscal space needed for increased social spending and public investment," the IMF statement said.

"Improving public financial management would help reinforce expenditure control."

Zimbabwe had diamond and platinum mines and was a net exporter of agricultural goods until white farmers were expropriated and driven away to neighbouring countries.

Countries like Zambia which gave land to fleeing Zimbabwe farmers is now exporting surplus grain to Zimbabwe the former 'bread basket' of the region.

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