Zimbabwe is broke after defaulting on its debt obligations and effectively cutting off its access to new capital. Note the word here is ‘broke’ as opposed to ‘bankrupt’, which is used in reference to companies that have to sell their assets to pay liabilities and distribute whatever little is left to shareholders.
In Zimbabwe, the joke is that every citizen is a millionaire today. When its currency collapsed, its value shrunk fast and at one point the Reserve Bank of Zimbabwe printed a Zimbabwean $100 trillion bill, at the time just worth US$10.
Compare that to 1980 when the average annual income in Zimbabwe was US$950, and a Zimbabwean dollar was worth more than its American counterpart. A populist despot in the late 1990s, Mugabe began a policy of forced nationalisation of white-owned farms, under a Government project called Fast Track, denounced Western donors, and began a crackdown on the opposition branding them traitors.
It’s been downhill since then. At some point in 2008, inflation in Zimbabwe hit a world record 13 billion per cent a month. To buy a loaf of bread weighing a half a kilo, one needed enough Zimbabwean dollar bills to fill a small saloon car. In many ways President Robert Mugabe is the architect of Zimbabwe’s woes and a lesson to those who insist Kenya can do without donor support and international goodwill in the event that the country is slapped with international sanctions. Strangely enough, his wife is busy buying up real estate for grandiose projects.
Unlike Kenya, Zimbabwe has a well-developed mining sector and at one point boasted a thriving large scale farming industry, producing enough to feed the nation and for export, but the shocks of a negative credit rating and sanctions eventually took their toll.
In Kenya, agriculture and tourism are our biggest foreign exchange earners, but both are heavily dependent on sustained dollar flows, which would quickly peter out in the face of punctured investor confidence and sanctions. Mugabe dismissed former British Prime Minister Gordon Brown as “a little tiny dot on this planet”. Now he is appealing for international aid.
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