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The Economy of Zimbabwe Past, Present, and Future Elisa Beltran Betsy Buse Kim Chase.

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Presentation on theme: "The Economy of Zimbabwe Past, Present, and Future Elisa Beltran Betsy Buse Kim Chase."— Presentation transcript:

1 The Economy of Zimbabwe Past, Present, and Future Elisa Beltran Betsy Buse Kim Chase


3 ZIMBABWE Population: 12.5 million Life expectancy: 43 years (men), 44 years (women) Main exports: Tobacco, cotton, agricultural products, gold, minerals GNI per capita: US $340


5 History 1800s British colonization of Zimbabwe and neighboring areas; known as “Southern Rhodesia” 1930s Land Apportionment Act forces many blacks into wage labor 1950s Central African Federation 1960s Federation breaks up Independence declared under white minority rule

6 History 1970s Civil War against white rule Peace agreement and new constitution formed, guaranteeing minority rights 1980s Robert Mugabe wins election, named prime minister April 18, 1980 – Independence as “Republic of Zimbabwe” Opposing political parties merge; ending of violence in the south Mugabe becomes “executive president”


8 History 1990s Mugabe reelected as president in 1990 & 1996 Harare Declaration Lavish spending and costly campaigns 2000 Land seizure ordered for all white farmers With drought, led to drastic food shortages

9 Mugabe Great leader when Zimbabwe struggled for independence– what happened? Mind stuck on “anti-rebellion ”


11 Summary of Causes War Government spending Hyperinflation due to money printing Lack of stable industry

12 What is happening in Zimbabwe now?

13 Current Economy PROBLEMS INCLUDE: unsustainable fiscal deficit an overvalued official exchange rate hyperinflation empty store shelves

14 Current Economy Fiscal Deficit: As of 2008, the government’s revenues were $153,700, and their expenditures were $179,300 Exchange Rate: Zimbabwean dollar was the official currency of Zimbabwe between 1980 and 12 April 2009 Least valued currency in the world Currency was effectively abandoned on 12 April 2009


16 Current Economy Hyperinflation 89.7 sextillion percent as of November 14, 2008 Still-growing crisis 94 percent unemployment rate as of 2009 Empty Store Shelves Government threatened to take over manufacturers and retailers who failed to cut prices by half, and store shelves were left empty

17 Current Political Situation President: Robert Mugabe Prime Minister: Morgan Tsavangirai Government Instability Volatile and violent political environment caused by strong opposition between political parties, Zanu-PF and MDC

18 Present Life in Zimbabwe Devastation People are going hungry as food sources continue to diminish Too dangerous for opposition Most of those who speak out against the government are arrested, beaten, and some even killed.

19 What is next for Zimbabwe?

20 Others’ Solutions Prime Minister Morgan Tsavangirai The Obama Administration The African Union Economics Professor Steve H. Hanke of Johns Hopkins University

21 Solution 1: First Thought Start over completely from scratch Forceful removal of the current government Potential issues?

22 Solution 2: Second Thought No quick fix Multiple steps needed

23 Step 1: Investment in Tourism Multiple Sites Harare Mountain Ranges Ruins Victoria Falls Benefits






29 Step 2: Redistribution of Currency Old currency 100 Trillion Zimbabwe dollars = $300 USD First reassurance of recovery

30 fail. Old currency First reassurance of recovery

31 Step 3: Temporary Enactment of a Monetary Policy Stand Still Reserve Bank policies = major cause of crisis Cut Mugabe out of these policies Administration controls fiscal Reserve Bank controls monetary Halt until definitely separated

32 Money Market, constant M s

33 Step 4: Enactment of Expansionary Fiscal Policies Need to increase low GDP By increasing government spending (G), you increase aggregate output (Y) How? On What?

34 Effect of G increase

35 Step 4 Continued Interaction between goods and money markets Partial Crowding Out Effect

36 Money Market

37 Goods Market Crowding Out Effect

38 Effect on P when Y increases Fiscal policies should be extremely effective at the current low level of output without a large price level increase.

39 Step 5: Implementation of Policies to Fight Inflation When minor change in output causes high increases in price level Reserve Bank needs to be ready to act

40 Short Term Only?

41 Step 6: Long Range Growth Policies Only way to impact aggregate output in the long run Technological Progress Invest in universities and education Labor Force Above actions = return of those who once emigrated

42 Effect of Long Range Growth Policies

43 Discussion Snags – Government cooperation – Lack of resources – Country willing to loan Long term effort

44 Summary Something Must Be Done Many Possible Solutions Our Plan = Macro 101

45 Sources zimbabwean-crisis-2009-02-02

46 Questions

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