Harare, Zimbabwe – This month, inflation in Zimbabwe peaked at 280 percent, one of the highest rates worldwide. The Zimbabwean dollar also weakened, trading at 930 against the US dollar on the OTC – a sharp fall after two months of relative stability at 700 to $1.
This led to a plummeting standard of living in the South African country where 7.9 million people, half of the population, fell into extreme poverty between 2011 and 2022.
Ahead of the 2023 presidential election, proposed currency reforms by the incumbent Emmerson Mnangagwa government have already been put on hold.
It is not surprising that economists, political scientists and multilateral institutions are sounding the alarm that the trend of declining economic fundamentals could continue into next year.
During a recent visit to the country, the International Monetary Fund (IMF) predicted a further decline in gross domestic product (GDP) of 3.5 percent in the coming year, partly due to “renewed domestic and external shocks (inflation rise, erratic rainfall , electricity shortages and Russia’s war in Ukraine) … with negative consequences for economic and social conditions.”
“These multiple shocks will continue to weigh on Zimbabwe’s growth prospects,” the IMF said in December.
Opportunities stacked against economics
Analysts say years of economic mismanagement under Zimbabwe’s first leader Robert Mugabe and later under his predecessor Emmerson Mnangagwa have hampered the economy, further aggravated by hyperinflation and the rapid devaluation of the currency.
For Gift Mugano, visiting professor of economics at the University of Zimbabwe Business School, the economic outlook for 2023 is bleak.
“The year 2023 will be very dire, driven by spillover effects from difficulties we encountered in 2022,” he told Al Jazeera.
Due to increased government spending, as the central bank prints more money for contractual obligations to government suppliers and to fund agriculture, the local currency is expected to continue to weaken against the leading currencies this holiday season and next year.
In November inflation was 255 percent, one of the highest in the world. But Mugano predicts that inflation and the exchange rate could more than double by the second quarter of 2023.
In addition, there are fears that while the central bank continues to dictate the exchange rate, there is no hope of convertibility dictated by free market conditions.
In its statement following its visit to Harare this month, the IMF urged authorities to permanently enshrine macroeconomic stability through foreign exchange liberalization, ensure that the central bank does not print money through quasi-fiscal operations , to implement a tight monetary policy and wind down the use of gold coins.
But economists doubt authorities will heed the advice.
“Zimbabwe is entering a very volatile social and economic period that needs politically minded leaders to handle this carefully, but I don’t see [the authorities] have the ability to think clearly about the management of Zimbabwe’s affairs,” Mugano said.
The war in Ukraine and high inflation are also affecting the agricultural sector. In Zimbabwe, which depends on fertilizer imports from Ukraine, prices skyrocketed from $28 to about $55 per 50-kilogram bag, putting bread, an everyday staple, out of reach for many residents.
There is also the issue of power outages across the country caused by reduced electricity generation at the hydroelectric power plant, Kariba Power Station, due to low water levels in the dam.
As a result, industries and households suffer from continuous power outages that can last up to 20 hours daily.
Authorities hope that the renovation works at the Hwange Thermal Power Plant will add 300 megawatts to the national power grid by the end of the first quarter of 2023.
Zimbabwe, which has traditionally depended on power imports from South Africa, Mozambique and Zambia, is now in a quandary as the region also faces a massive power shortage.
Politics and policy
Much also depends on the approaching general election.
Mnangagwa, who has been president since November 2017, is expected to make a bid for a second term but has been met with strong opposition.
Opposition leader Nelson Chamisa rallied the Citizens Coalition for Change (CCC) to win 19 of 28 seats in the parliamentary by-election. While the ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) still has a parliamentary majority, analysts said CCC’s performance could be a preview of how it could perform in the 2023 presidential election.
In February, there were 37 opposition supporters arrested at a rally and there have been other violent incidents against dissidents in recent months.
Rashweat Mukundu, a Harare-based independent political analyst, is almost certain of heightened political instability in the months leading up to the polls and beyond.
Given the high political stakes of the upcoming election, Mnangagwa appears to be pulling out all the stops to retain the presidency, he said.
“I think 2023 will be a political downfall for Zimbabwe as there is a high probability of politically motivated violence in midterm elections but is likely to increase towards the city council, parliamentary and presidential polls,” he told Al Jazeera.
“I think ZANU-PF will try as much as possible to stop all opposition campaigns, both in urban and rural areas, using the security structures and also party militias,” added Mukundu. “This is a zero-sum political game and election for Mnangagwa that he wants to win at all costs.”
In fact, Zimbabwe’s Crisis Coalition, a grouping of more than 80 non-governmental organizations in the country, has warned that the upcoming election could be the bloodiest in Zimbabwe’s history.
“In fact, as we head into 2023, we think it (political violence) will happen [get much worse]said Crisis Coalition of Zimbabwe Chairman Peter Mutasa.
Analysts say Chamisa and the opposition hope voters can vote to show enough disappointment at the government’s frivolity in treating them.
And there is historical precedent to give them hope.
In the 2008 election, Mugabe lost to the late opposition leader Morgan Tsvangirai when a historic hyperinflation of over 1,000 percent devastated the economy.
Just like then, the economy is in free fall again. If the Mnangagwa government wins, Mugano warns, it could use economic policies at will to bend the situation in ZANU-PF’s favour.
“For example, if Zanu wins the poll, they will continue with their economic principles and continue on the path of runaway inflation,” he said.