Economics 101

Living in Zimbabwe is a very interesting way to learn about economics. Many people thought that Dr. Gono (reserve bank governor) would devalue the currency in his last speech, but he did no such thing. So, our fixed exchange rate still stands at 250:1 (250 Zim dollars to 1 US dollar). The real (floating) exchange rate fluctuates, but is at about 4700:1 (which is quite different from 250:1). Of course, prices for goods and services tend to reflect the real exchange rate, and prices are going up all of the time. For international non-governmental organizations, this causes a huge challenge. Money from overseas obviously gets transferred through the bank, so that when it comes out, it is at the official rate. Therefore, most of the value of the money is lost - which is very sad, because that money really could have gone a long way in helping people who really need it.

NGOs are hard hit because of increasing prices for everything, but also by donors who cannot understand why Zimbabwe is always asking for more money. When my department at work made our annual budget, we accounted for a certain percentage of inflation, and so the amounts we requested were very high - much, much higher than last year's budget. And so only 1% of our budget got approved. Now we are trying to plan training events, but the amount of money we have to work with is next to nothing. The amount of foreign exchange that used to sustain an organization for 2 years now won't even last a month, because the value of that money is decreased so much. NGOs are wary of the ever-increasing demands for money, and many are pulling out. Of course, people say that it's better if all NGO work is sustained by Zimbabweans anyway, without relying on overseas transfers - but that is also a challenge when 80% of the population is unemployed, and the majority of people are living in poverty.

The rate at which prices and inflation are rising is incredible. Of course, the government is trying to crackdown on the black market, but it is a large task. There is a parallel market for currency, because it is almost impossible to get foreign currency from the bank. Everything from problems with our water sanitation system to problems with electricity and problems with our communication system is blamed on lack of forex ("no forex, so we can't buy parts.") There is also a parallel market for goods such as fuel or sugar or bread. For example, you can find sugar in shops now, so you see LONG sugar queues outside of shops. Some people buy many bags, and then sell them on the street at a higher price. The parallel market causes shortages, but also helps people to access goods in times of shortages. I took basic economics in university, but living here has made concepts quite a bit more real. Dr. Gono is a well-educated, intelligent man. Please continue to pray for great wisdom for all of those making decisions about the economy, and all of those who are affected by it. Most people are waiting for a miracle.