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Zimbabwe's Economy in Danger of Collapsing - 2002-11-05


Zimbabwe's economy is sinking rapidly. In the past few days the value of the local currency has plunged. Economists are saying the collapse of the country's economy is in sight.

The price of meat doubled this week. The Zimbabwe dollar is trading on the black market at more than 1,500 to the U.S. dollar, a fall of more than five times its value at the beginning of the year. There is little fuel in Harare and even less in most smaller towns.

Economists say the decline in manufacturing continues at about three percent per month.

Professor Tony Hawkins, an economist at the University of Zimbabwe, said recently he believed the economy would disintegrate within six months.

With most commercial farmers off their land, the harvest due next April, will be grown by new farmers with little experience and no equipment.

The three main banks in Zimbabwe, two British and one South African, have made it known they would not risk investors' money on new farmers who have no collateral.

Economists say negotiations are continuing, whereby insurance companies and pension funds, which are legally obliged to have 45 percent of their resources invested with the government, would have to provide loans to the new farmers. But that too will have repercussions.

Economists say the interest offered by the government on that money would be too low to prevent the collapse of pension funds and would undermine the insurance industry.

In fear of economic collapse and the prospect of never working again, workers are turning increasingly to bogus unions that demand money from employers. The bogus unions then claim up to 35 percent of workers' pay. Many employers of small to medium-size companies say they agree to pay the money because they fear for their lives.

To prevent invasions of their premises by the bogus unions as well as by ruling party supporters, many companies have increased security.

Meanwhile, the United Nations estimates that half the population, almost seven million people, is in need of food aid.

Queues grow daily, even in urban areas, which are traditionally less vulnerable to financial crises. Many people in Harare say they only eat once a day.

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