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Rediff.com  » Business » Hazards of inflation: Zimbabwe at 100,000%

Hazards of inflation: Zimbabwe at 100,000%

March 29, 2008 14:54 IST

Have you heard of a country which is dotted with malls filled with goods, but no customers? It is Zimbabwe, the land of Mugabe.

Zimbabwe is a classic case of how inflation can make life hell for people. Experts say it all started with Mugabe's regime. Whatever may be the reason, the basic flaw in Zimbabwe's economy is that Zimbabwe lost its ability to feed itself.

So, if you don't have enough agriculture commodities the prices are bound to go up. This is one lesson India can learn from Zimbabwe.

India's wheat, rice, pulses and edible oil production is not enough to keep pace with the growth the country is witnessing. That is why Indian government is worrying about the rising inflation rates. It was above 5% last week.

However, it is not anywhere near Zimbabwe. Zimbabwe's skyrocketing inflation -- now the world's highest, running at more than 100,000 per cent a year -- keeps the cost of living rising.

In 1979, when Mugabe's nationalist rebels overthrew the white-dominated government of Rhodesia, and changed the name of the country to Zimbabwe, thousands of commercial farms managed to grow enough food to export throughout the

region.

At present, more than a decade of mismanagement and neglect has dropped agricultural production to pre-colonial levels.

This year, Zimbabwe's shortfall in maize is 360,000 tonnes, and its shortfall in wheat is 255,000 tonnes.

Streets of Zimbabwe are dotted with shopping mall. That shows that there is food on the shelves, but all of it highly priced.

Massive department stores, built for a time when farmers from miles around would come to do their weekend shopping, are full of clothes, but without customers.

With cash almost a worthless possession, people have started investing in something different. They stack bags of maize meal in their homes.

The situation in Zimbabwe has hit several Indians badly. Many of the Indian businessmen in Zimbabwe, especially Gujaratis, are finding it tough to do trade there.

Because, a sausage sandwich sells for 30 million Zimbabwe dollars, or about US $1.25. A 30-pound bag of potatoes cost 90 million in the first week of March. Now that same bag costs 160 million.

So, Zimbabwe is an example for the world how inflation can ruin a country, which does not produce enough food for itself.