Zimbabwe economy shrank 14% last year

The Zimbabwe economy shrank 14% last year according to an e-mailed statement from the International Monetary Fund. The fund says the contraction in the countries economic caused "catastrophic" poverty.

From Bloomberg, reporters Nasreen Seria and Mike Cohentells tell us more of what was in the IMF's statement.

Between 2000 and 2007, the economy shrunk 40 percent, while inflation was estimated at a record 500 billion percent last September, the Washington-based lender said in an e-mailed statement today. The economy will probably rebound this year, expanding an estimated 2.8 percent, the IMF forecast.

Zimbabwe’s economy has shrunk every year this past decade after President Robert Mugabe seized farms belonging to white farmers to redistribute to blacks. That slashed export earnings, resulting in shortages of food, fuel and foreign exchange. Mugabe agreed this year to share power with the opposition Movement for Democratic Change, paving the way for Zimbabwe to begin negotiating with the IMF and other lenders for loans.

“A decade of high inflation, severe economic decline, and rising poverty has culminated in an acute, ongoing humanitarian crisis,” the IMF said. “Zimbabwe is now at a critical juncture.”

The IMF’s Executive Board agreed today to lift its suspension of “technical assistance” to Zimbabwe and plans to help the country with advice on tax policy, payments systems and banking supervision, the fund said.

The IMF requires Zimbabwe to clear its arrears to all multinational lenders and demonstrate a sound policy track record before it can resume lending to the southern African nation. Zimbabwe’s debt arrears total about $3.8 billion, with about $133 million owed to the IMF and a total of $1.1 billion to the World Bank and the African Development Bank.