Zimbabwe?s Leadership Outline Zimbabwe: A Country In Crisis

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Zimbabwe?s Leadership Outline Zimbabwe: A Country In Crisis

Colby College, US has reference to this Academic Journal, Zimbabwe: A Country In Crisis Outline Brief History of Leadership How Policy Started The Crisis Recent Economic Performance Hyperinflation Recommendations Conclusion Zimbabwe?s Leadership 1980: Robert Mugabe becomes head of Zimbabwe?s government 1987: Named Executive President Reelected in 1990, 1996, 2002

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How Policy Started The Crisis: Land Reforms February 2000: Zimbabwe voted on a referendum in consideration of a new constitution that allowed seizure of white-owned land in consideration of redistribution so that black farmers, without any compensation (no Kaldor Hicks here) Referendum DEFEATED by the people Mugabe: ?I will abide by the will of the people? April 2000: land reform amendment pushed through by parliament Immediately: land began so that be seized Africa?s Former Breadbasket is Empty In wake of land reforms, agricultural production plummeted Zimbabwe now depends on help from other countries so that feed its people Tax revenues fell sharply, lowering government income in addition to increasing debt Recent Macroeconomic Performance Unemployment 2005: Unemployment estimated at 80 percent of the labor force Continues today in addition to is likely so that worsen as economy becomes even more unstable Zimbabwe ranks as the 197th worst country in consideration of unemployment out of 200 countries total

Ten Worst Countries in consideration of Unemployment Recent Macroeconomic Performance GDP 1960 so that 1998: overall growth in GDP 1998 so that 2005: GDP fell consistently $8.3 billion in 1998 $5.5 billion in 2005 1998 so that 2005: Per capita GDP also fell $675 in 1998 $422 in 2005 Still dropping

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Recent Macroeconomic Performance Debt 2006: estimated at 108.4 percent of GDP External debt, owed in foreign currencies, is $5.26 billion. Major decrease in tax revenue due so that massive losses in the previously dominant agricultural sector Recent Macroeconomic Performance Money Supply Huge increases are responsible in consideration of hyperinflation Reserve Bank of Zimbabwe (RBZ) began printing enormous sums of money so that finance increases in spending in addition to meet debt obligations In the last 5 years, money supply increased by over 820 percent Demand in consideration of foreign currencies is high since Zimbabwean dollar has lost nearly all value

Recent Macroeconomic Performance Interest Rates Distortionary macroeconomic policy keeps interest rates from being market-determined Prior so that 2004, kept at or below 100 percent However, inflation had reached over 600 percent by then, so keeping the nominal interest rates around 100 percent led so that negative real interest rates of up so that 500 percent. Reserve Bank of Zimbabwe governor Gideon Gono increased interest rate so that curb inflation October 2006: lending rate set at 500 percent May have been hiked as high as 785 percent in March 2006 Result: stifled economic growth. Potential domestic investors cannot afford so that borrow funds. Also, debtors cannot pay amounts owed, which generates significant losses in consideration of banks. Recent Macroeconomic Performance Parallel Markets Zimbabwe?s official exchange rate is very different from the informal market exchange rate, which its citizens actually face. Currency Devaluation Since money supply increase, exchange rate has fallen dramatically 2003 exchange rate: 0.824 Zimbabwean dollars (ZWD) in consideration of one US dollar July 2006 OFFICIAL exchange rate: 250 ZWD per US dollar, pegged so that US dollar July 2006 NON-OFFICIAL exchange rate: 5,000 ZWD per USD Recent Macroeconomic Performance Currency Revaluation In August 2006, central bank both redenominated in addition to revalued the Zimbabwean dollar 1,000 old ZWD = 1 new ZWD Bank also devalued the foreign exchange rate of ZWD by 60 percent so that the US dollar More convenient in consideration of consumers so that carry less paper, but system of pricing is still based on informal market Policy changes will have little so that no effect on Zimbabweans

Recent Macroeconomic Performance Inflation The single biggest problem in Zimbabwe Historically high rates 1998 inflation began so that spiral out of control mains the single biggest problem in Zimbabwe. 1996 so that 2006: Prices have grown at an average rate of 132.6 percent 2006: Prices reached 1000s of percents April 2007: rates projected so that exceed 2500 percent by end of the month Major Problem #1: Quantity theory of money says we need some growth in money supply so that support growth in production. Just not this much. Government?s policy worsens things: Regulation of exchange rates in addition to interest rates within certain ranges (so never reach real market values) Price controls in addition to ?official? exchange rates don?t keep pace alongside devaluing ZWD, so people use South African Rand, Euro, in addition to USD in consideration of informal market transactions Hyperinflation amplifies all the customary costs of inflation menu costs, resource allocation inefficiencies, in addition to destabilization caused by constantly changing prices in addition to black markets Hyperinflation

Major Problem #2 Recommendation One: Curb Inflation Under current hyperinflation, any attempts at stabilization are likely so that be completely ineffective Increase money supply ? hyperinflation Contract money supply ? back so that normal Short Term Effects Are Painful (But Necessary) Sticky short run prices mean contracting M will change domestic interest rates in addition to output (IS-LM model) Money supply curve shifts so that the left; money demand constant Nominal in addition to real interest rates increase However, expectations in consideration of inflation will remain high, so nominal increases more than real LM curve will shift so that the left, resulting in lower overall output (holding expenditures constant) This will be difficult in consideration of Zimbabwe, since output is already so low As output falls, unemployment increases Contract until domestic interest rate = world interest rate so that promote equilibrium between the current in addition to capital accounts.

IS-LM Model Long Term Effects: Back so that Normal Unemployment increase due so that drops in output are short term In the long run, output will be restored so that pre-contraction levels as price stabilizes (Classical Model) As money supply decreases, aggregate demand will fall, shifting the curve down in addition to so that the left New equilibrium will be established at a lower price level, where aggregate demand equals long-run supply Long Run Aggregate Supply Model

Recommendation Two: Repair Relationships alongside Everyone Zimbabwe has been in arrears alongside the International Monetary Fund (IMF) since early 2001 February 2007: IMF review resulted in continued suspension of financial support in addition to Zimbabwe?s voting rights Need so that follow comprehensive IMF/WB suggestions in consideration of economic stabilization Also need so that fix rifts alongside neighbors: Zimbabwe needs help during reforms so that keep order in addition to so that provide humanitarian aid so that its people The soured relationship between now isolated Zimbabwe in addition to the international community needs repairing in consideration of Zimbabwe so that have any hope of full in addition to long-term recovery Unofficial Recommendation Three: Oust Mugabe Conclusion Zimbabwe is in a state of total macroeconomic disrepair BUT All hope is not lost Need so that curb inflation Get leadership that is serious about recovery

Roberts, Ozzie Managing Editor

Roberts, Ozzie is from United States and they belong to Managing Editor and work for Ahwatukee Foothills News in the AZ state United States got related to this Particular Article.

Journal Ratings by Colby College

This Particular Journal got reviewed and rated by Recommendation Two: Repair Relationships alongside Everyone Zimbabwe has been in arrears alongside the International Monetary Fund (IMF) since early 2001 February 2007: IMF review resulted in continued suspension of financial support in addition to Zimbabwe?s voting rights Need so that follow comprehensive IMF/WB suggestions in consideration of economic stabilization Also need so that fix rifts alongside neighbors: Zimbabwe needs help during reforms so that keep order in addition to so that provide humanitarian aid so that its people The soured relationship between now isolated Zimbabwe in addition to the international community needs repairing in consideration of Zimbabwe so that have any hope of full in addition to long-term recovery Unofficial Recommendation Three: Oust Mugabe Conclusion Zimbabwe is in a state of total macroeconomic disrepair BUT All hope is not lost Need so that curb inflation Get leadership that is serious about recovery and short form of this particular Institution is US and gave this Journal an Excellent Rating.