Monday, August 14, 2006

Zim: an upside down economy

HARARE, 11 August (IRIN) - Nearly 90 percent of Zimbabwe's currency is kept outside of the banking system, which, analysts say, illustrates that the parallel market is the driving force in the economy, while the formal sector withers. ...

"The parallel economy now underpins Zimbabwe's survival. The black market in particular has been flourishing over the years, and this has been made possible by the ever-shrinking formal market, due to reduced productivity in industry and in agriculture, shortages of foreign currency and a steep decline in investment," Kwesu said."Informal trade and the black market have been growing, owing to the economic problems the country has been facing for a number of years now. It has been easy for the two to take root, because they normally do not require a lot of money to start and they can easily be managed," he said....

Analysts say the rapid growth of the informal economy has been counter-productive, because the money generated is used mainly for consumption rather than development. "The parallel economy is not concerned about the building of schools, hospitals or the setting up of infrastructure that the majority of the people can benefit from. Instead, it creates a dangerous situation, because those who are involved in it do so for self-enrichment," said Zembe."Policy planning becomes difficult because the activities in the informal and black markets are not recorded, while people speculate and push inflation up, in addition to the creation of artificial shortages of foreign currency, basic commodities and industrial inputs," he commented....

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