Economy

Properly managed, Zimbabwe's wide range of resources should enable it to support continuing economic growth. The country has an important percentage of the world's known reserves of metallurgical-grade chromite. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, platinum and iron ore.

However, its ongoing political turmoil and the world's highest rate of AIDS infection have greatly hampered its progress. Robert Mugabe's policies towards land reform have led to internal upheaval and population displacement, high inflation, and an inability of the country to feed itself. As of mid-2006 Zimbabwe has a fast shrinking economy and the highest inflation in the world.

In Depth

The government of Zimbabwe faces a wide variety of difficult economic problems after having abandoned earlier efforts in developing a market-oriented economy. Current problems include a shortage of foreign exchange, soaring inflation and supply shortages. Zimbabwe's involvement from 1998 to 2002 in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. Land distribution to the black majority has led to a decline in agriculture exports.

The downward spiral of the economy has been attributed mainly to mismanagement, corruption and Zimbabwe's inability to feed itself after evicting more than 4,000 white farmers in the controversial farm invasions of 2000. However, Robert Mugabe has repeatedly blamed economic sanctions imposed on Zimbabwe by the UK and the USA. He has also blamed these countries for a shortage of foreign currency.

Inflation

According to official figures, inflation rose from an annual rate of 32% in 1998 to a high of 1,593.6% in January 2007, a state of hyperinflation. The exchange rate fell from 38 Zimbabwean dollars per US dollar in 2000 to 26,003 Zimbabwean dollars in 2006 (official rate). In August 2006, The RBZ (Reserve Bank of Zimbabwe) re-valued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) Dollar. At the same time, Zimbabwe devalued the Zim Dollar by 60% against the US Dollar. New official exchange rate revalued ZWD 250 per USD.

President Mugabe points to foreign governments and alleged 'sabotage' as the cause of this hyperinflation, as well as the country's 80% unemployment rate. Critics of Mugabe's administration, however, immediately indicate the main cause of some of these issues stems from Mugabe's controversial program which sought to seize land from racially white commerical farmers.

Infrastructure

Zimbabwe has adequate internal transportation and electrical power networks. Paved roads link the major urban and industrial centres, and rail lines managed by the National Railways of Zimbabwe tie it into an extensive central African railroad network with all its neighbours.

The telephone service is problematic, and new lines are difficult to obtain.

Energy

In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River but augmented since 1983 by large thermal plants adjacent to the Wankie coal field. With considerable hydroelectric power and plentiful coal deposits for thermal power stations, Zimbabwe is less dependent on oil as an energy source than most other comparably industrialized countries. Only about 15% of Zimbabwe's total energy consumption is accounted for by oil, all of which is imported. Zimbabwe imports about 1.2 billion litres per year. Dependence on petroleum is managed through the price controls for vehicle fuels, the use of gasohol, and the substitution of diesel-electric locomotives on the railway system. Zimbabwe also has substantial coal reserves that are utilised for power generation, and recently discovered in Matabeleland province are coalbed methane deposits greater than any known natural gas field in Southern or Eastern Africa. In recent years, poor economic management and low foreign currency reserves have led to serious fuel shortages.

As of 2006, crumbling infrastructure and lack of spare parts for generators and coal mining means that Zimbabwe imports 40% of its power - 100 megawatts from the Democratic Republic of Congo, 200 megawatts from Mozambique and up to 450 from South Africa, and 300 megawatts from Zambia.

Agriculture

Agriculture was once the backbone of the Zimbabwean economy. Due to large-scale eviction of white farmers and the government's land reform efforts, this is no longer the case. Reliable crop estimates are not available due to the Zimbabwe government's attempts to hide the realities following the evictions. The ruling party went as far as banning maize imports, stating record crops for the year of 2004.

Before the farm evictions, maize was the largest crop grown, whilst tobacco was the largest export crop followed by cotton. Poor government management has exacerbated meagre harvests caused by drought and floods, resulting in significant food shortfalls beginning in 2001.