Zimbabwe is facing an Asian-type meltdown, but for very different reasons. The consequences also will prove radically different, and possibly of longer duration.
Zimbabwe's currency collapsed in November, rapidly falling from 11 Zimbabwe dollars to one US dollar to Z$22 to $1. Zimbabwe's minister of finance implemented extraordinary measures that strengthened currency to Z$13 to $1, before losing ground again and falling to its January rate of about Z$17 to $1.
Zimbabwe's stock market, one of the world's top performers (90 percent growth in 1996), plummeted 26 percent and hasn't recovered. The local business confidence index has suffered correspondingly, and, as a result, one of Africa's most vibrant economies has stagnated.
East Asian countries and banks had borrowed heavily in US dollars and now must seek IMF and US bailouts to pay off creditors. Yet, once this severe shock to their banking and credit systems is absorbed and the mistakes of recent years are rectified, they each can become some form of tiger again.
But Zimbabwe's ills are different. Its currency collapsed not because of over-borrowing in dollars, or loose banking arrangements, but because its government decided to attack its most productive export sectors. Forty percent of all export earning comes from agricultural goods grown on farms owned and managed by whites. Of Zimbabwe's 13 million people, 70 percent still till the land, and about 100,000 are white. More than 4,000 of those 100,000 farm and control half of the country's arable land.
In October, President Robert Mugabe announced that his government would confiscate land holdings from 1,500 of those farmers - about 12 million acres. Not surprisingly, the country's confidence and currency plummeted. According to the government's auditor-general, previous land transfers of about 8.3 million acres resulted in farms that were "grossly underutilized."
It is estimated that Zimbabwe's export earnings will fall proportionately with the number of farms confiscated, about 37 percent. President Mugabe wants to give the 1,500 farms to some 150,00 landless Zimbabwean peasants. That number roughly corresponds with the number of agricultural laboring jobs that will be lost if the farms are nationalized.
It will cost about $1 billion to settle these peasants on the farms. Britain, which a decade ago gave Zimbabwe $75 million to resettle landless Africans, has refused to consider any financial assistance, harshly criticizing the initiative.
But because there are no funds with which to transfer the lands to be taken, President Mugabe has hinted he might "lease" the lands for an interim period to wealthy Africans. That might include Cabinet members, the president's relatives, and others favored by the government.
As if that weren't enough
Adding to the turmoil, there was a further fiscal crisis last month. The government's attempt to raise taxes by 5 percent to pay for special, suddenly granted pensions to angry veterans of Zimbabwe's guerrilla struggle against white Rhodesia was rescinded after Mugabe's ruling party, as well as labor unions, took to the streets of Harare in protest.
Finance Minister Herbert Murerwa persuaded the World Bank to release $60 million of a Second Structural Adjustment Credit. Dr. Murerwa satisfied the bank that his government could meet its obligations to the war veterans and take reductions elsewhere in its annual budget. Those budgets are regularly in deep deficit. The IMF will soon decide whether to provide Zimbabwe with additional backing in the form of a standby credit. Balance-of-payments support may follow.
Zimbabwe has promised the IMF and the World Bank that it will, at last, privatize its state-owned telecommunications infrastructure. Like so many countries in Africa, Zimbabwe has refused to sell state-controlled industries and services. That failure has contributed to a lack of competition, high domestic borrowing, and low economic growth.
Selling off this part of the state's patrimony will help open the economy to foreign investment and competition. It also should improve the country's poor telephone service. Most of all, it should generate significant amounts of capital.
Support from the international lending organizations, as well as the selling of the phone system, may help reverse the slide in consumer confidence. Unless it does, Zimbabwe may face months of political and economic uncertainty. The possibility of serious unrest and instability remains.
* Robert I. Rotberg is president of the World Peace Foundation in Cambridge, Mass.