In response to an ongoing inflation crisis that has reached up to 9,000 percent, Zimbabwe President Robert Mugabe ordered price controls effective June 18, 2007. These price controls have reduced the costs of daily goods by up to 50 percent. Many economists blame the crisis on the seizure of farms belonging to Caucasian citizens, beginning in 2000, however, the inflation has largely been caused by Mugabe’s disastrous economic policies.
Among the most damaging policy is the decision to continually print more money without any inflation controls in place. Additionally, the government has set exchange rates without taking the economic situation into consideration resulting in a devalued currency that further exacerbates the problem. The economic crisis has increased drastically over the past six months with inflation officially reaching over 4,500 percent in May 2007. However, international economists estimate that inflation has actually reached almost 9,000 percent.
Rather than alter economic policies that would reflect the current economic crisis, the price cuts are designed to win support of the population who has struggled in recent months to afford daily necessities. However, the government has not instituted price controls on the production side of the economy resulting in products that are selling for less than they cost to produce. Last week the government extended the price cuts to consumer goods, mobile phone charges, fares on the state airline and spare parts for cars.
The economic crisis appears to be worsening, and the overall affects will continue to be seen in the near-to-mid-term, with lasting long-term consequences.
Enforcement of Price Cuts Leads to Arrests
On July 6, Mugabe ordered any businesses not complying with the new price controls to be seized by the state. Police have raided stores, warehouses and gas station to enforce the new price controls. The general population has rushed to purchase products they have had difficulty affording in recent months, resulting in stampedes that have verged on riots. In response to prices that are below production costs, some businesses have shut down.
While announcing plans for the state to seize businesses that fail to adhere to the price controls or which shut down due to production costs, Mugabe enlisted the support of militant youth supporters to report Zimbabweans who fail to follow the price controls. The youth militias and former soldiers who brought Mugabe to power in 1980 have previously been used in the seizure of Caucasian-owned farms, as well as to crush dissent. By having the groups present at the announcement that the government would seize businesses, there have been fears that the militias could be getting ready to suppress any civil demonstrations.
Crisis Imminent
There is a severe shortage of cornmeal, bread, salt, sugar, and other basic foodstuffs and it is estimated that there is less than a one-week supply of remaining food staples. Zimbabwe’s capital city, Harare, is already out of beef, milk, chicken, and pork due to producers refusing to slaughter their animals to be sold at reduced prices. There is a growing scarcity of gasoline as well.
We believe, without immediate changes in President Mugabe’s economic policies, that there could be an imminent crisis in Zimbabwe. We are primarily concerned by the prospect of civil demonstrations and the violent tactics used to keep order, as well as by the prospect of starvation on a large scale.
If the economy completely collapses, which is quite possible, we believe there is a potential for mass civil unrest. These civil disruptions could lead to the end of President Mugabe’s 27-year rule and possibly lead to chaos throughout the country.