Zimbabwe’s economic situation is quite critical: the country has been  downgraded in four global rankings and performed worse than the regional and income group averages. If we consider the macroeconomic situation, we can see that the country’s indebtedness has continued to spiral due to re-capitalization of interest. The debt figure could shoot to well  over US$ 7 billion by 2011 if it is not systematically reduced, according to independent forecasts.

This creates a lot of problems for country public finances. Minister Biti revealed, on 30 June 2009, that external debt stands at US$ 4.6 billion. Per capita GDP remains one of  the lowest, at US$ 200, and an unemployment rate of 80%. All of these factors make Zimbabwe one of the most impoverished countries in the world. There is no room to invest in infrastructure or financial  institutions. Zimbabwe imports over two billion dollars of commodities, while only having a little over six million dollars in actual revenue.
Economic Freedom

One of the main problems of Zimbabwe’s economic sector is the lack of economic freedom, with a score of 22.1, making its economy the 178th freest in the 2011 Index of Economic Freedom. The index measures economic freedom within 10 specific categories: labour freedom, business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial  freedom, property rights and freedom from corruption. Scores in these  categories are averaged to create an overall score.

Zimbabwe’s score has increased by 0.7 points from last year, but there is a need of a more consistent increase because Zimbabwe is still ranked last out of 46 countries in the Sub-Saharan Africa region. The Index of  Economic Freedom ranks countries according to criteria that assess a country’s economic openness, trade and the efficiency of domestic regulators, freedom from corruption, property rights and the rule of  law. The report is compiled by the Washington-based Heritage Foundation and the Wall Street Journal. In 2008, Zimbabwe was in the same position.

Investment Freedom

The Zimbabwean economy is characterized by instability and volatility, caused also by excessive government interference and mismanagement of  the economy. The country’s fragile economic infrastructure has further crumbled under a tyrannical and oppressive regime.

Today, in Zimbabwe, a highly controversial new law requiring businesses to be majority-owned by indigenous Zimbabwean citizens comes into effect. Every company with an asset value over $500,000 needs to submit paperwork detailing the racial background of its shareholders. If the company has a majority  of white or foreign shareholders, the Indigenization and Economic Empowerment Act, brainchild of President Robert Mugabe, whose catastrophic land reform act caused hyperinflation and famine, requires it to transfer shares to indigenous Zimbabweans. The goal of  the law, “a deliberate involvement of indigenous Zimbabweans in the  economic activities of the country, to which hitherto they had no access, so as to ensure the equitable ownership of the nation’s  resources,” is a noble one. But the law is a calamity that promises to drive away foreign dollars and further the impoverishment of average Zimbabweans.
[/premium_content] By Matteo

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