There are governments struggling with deficits, cash-strapped governments and there are broke governments. And then there’s Zimbabwe, which is down to its last $217 after paying government official salaries last week.
Finance Minister Tendai Biti, known for his exaggerated rhetoric, said that monthly salaries cleared out government earnings and tax revenues in January as he made an appeal for foreign donors to help raise some $200 million for elections this year.
"Last week when we paid civil servants there was $217 [left] in government coffers," Tendai Biti told reporters. "The government finances are in paralysis state at the present moment. We are failing to meet our targets."
Zimbabwe is home to some of the world’s largest plutonium and diamond reserves and financial experts have said that Biti has failed to take into account quick returns from income tax, social security payments and increased taxable spending in shops and stores.
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Zimbabwe is hardly a stranger to financial trouble with the country’s economy taking a turn for the worse in 2000 when President Robert Mugabe seized the land of over 4,000 white-owned farmers, effectively dismantling the country’s agriculture industry.
Over the next decade, the country spiralled into an extended period of hyperinflation. In August 2008, inflation reached a staggering 11,200,000 percent and around the same time economists around the world began to say the country’s situation was hopeless.
As prices doubled every second day, the government responded by printing 100 billion Zimbabwean dollar notes. The following year, the government printed Z$100 trillion notes, before chopping 12 zeroes off of the currency.
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Having struggled with its finances for more than a decade it’s unclear just how the Zimbabwean government can get itself out of the mess it has created for itself. As Quartz's Tim Fernholz points out, Zimbabwe is looking at a $104 million bill for its upcoming election and dealing with brand new allegations that government officials have been running a corruption ring around the country's diamond mines.
The country obviously desperately needs a major change. "But action against corruption probably won’t come until the end of Mugabe’s reign, and a new constitution coming up for a referendum this spring - presuming the funds can be found - might set up the aging autocrat for another term in power," writes Fernholz.
The Reserve Bank appears in no rush to move its interest rate any time soon and seems a little bit more optimistic …