Economic sanctions imposed on Zimbabwe by Western countries, for nearly two decades and half, have caused massive financial losses and damaging economic challenges, experts say.
According to a report by the Southern African Development Community (SADC) submitted to the United Nations High Commissioner for Human Rights, Zimbabwe’s economy has missed out on a staggering US$150 billion in potential revenue since 2001 due to these sanctions.
“Zimbabwe has lost well over US$150 billion in revenue over the past 23 years because of the sanctions,” the SADC report details.
“This includes lost bilateral donor support estimated at US$4,5 billion annually since 2001, US$12 billion in loans from the International Monetary Fund, the World Bank and African Development Bank, commercial loans of US$18 billion, and a GDP reduction of US$21 billion, among other deferred foreign direct investments.”
The crippling impact has extended beyond lost revenues to reversing development gains, derailing infrastructure projects, weighing on educational initiatives, healthcare improvements, and other essential services.
Zimbabwe and the Southern African Development Community set October 25 of every year to observe and call for the removal of the illegal economic embargo.
Dr Itai Mahlangu, a developmental economist, explained the reality of Zimbabwe’s worsening poverty and social instability, stating that “This has resulted in the most vulnerable sections of the population sinking deeper into poverty.
“For instance, the proportion of the population in extreme poverty rose in the aftermath of sanctions.
“To this end, Zimbabwe’s quest to attain the United Nations Sustainable Development Goals (SDGs) has also been severely impacted.”
The sanctions have left their “undesirable” mark across multiple sectors, with Zimbabwe’s manufacturing and export industries particularly hard-hit.
Rumbidzai Moyo, a Zimbabwean trade specialist with over a decade of experience in international markets, explained the challenges facing local manufacturers.
“The manufacturing sector in Zimbabwe has been severely constrained by these sanctions.
“Our businesses are unable to secure critical machinery, spare parts and raw materials from international suppliers,” she notes.
“This makes it nearly impossible for us to compete in regional and global markets.”
Zimbabwe’s export potential has also been stymied by sanctions, with many companies finding it difficult to establish partnerships with foreign clients who fear reputational and financial risks due to the country’s perceived status.
Ms Moyo describes the regular struggles faced by exporters: “When our goods make it to foreign shores, many businesses and banks are hesitant to transact with us.
“We often face rejected payments, increased costs for intermediaries, and delayed shipments.
“This erodes our competitiveness and discourages foreign investment in Zimbabwe’s industries.”
A significant consequence of Zimbabwe’s isolation has been its inability to access international credit markets. Economist Tinevimbo Shava explained how this has deteriorated Zimbabwe’s financial position and creditworthiness.
“Zimbabwe’s access to international credit markets was blocked following the enactment of sanctions. The country has been forced to virtually operate on a hand-to-mouth basis, resulting in a significant build-up of external debt arrears,” he notes.
“This unfavourable development has worsened the country’s creditworthiness as the country’s international financial risk profile escalated.”
Financial assistance was cut after the International Monetary Fund (IMF) and the World Bank stopped extending credit.
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For instance, the US has a standing decree, under the Zimbabwe Democracy and Economic Recovery Act (ZIDERA), for any American official seconded to an international organisation to veto all forms of financial help to Zimbabwe.
Since 1999, Zimbabwe has been suspended from receiving funding and technical support from these organisations, and the economic consequences have been devastating.
Apart from the negative impact on economic growth, the sanctions have weighed heavily on employment growth.
Mr Shava elaborated on the cascading impact of these sanctions, noting that, “Without the ability to engage with International Financial Institutions (IFIs), Zimbabwe has missed out on critical financial aid, technical assistance, and foreign direct investment.”
He added that “the sanctions have led to Zimbabwe and its entire financial linkages with the rest of the world being branded as high risk, thereby making the country a compelling target for de-risking interventions by lending correspondent banks in the US and Europe.”
The lack of access to these financial markets has led Zimbabwe’s external payment arrears to increase steadily, further burdening the economy and retarding development.
With limited foreign financial aid, the Government has struggled to stabilise the currency, which has in-turn led to high inflation rates and increased poverty.
Zimbabwe’s banks and money transfer agencies are particularly hard-hit by the severance of correspondent banking relationships with international financial institutions, a key consequence of the sanctions.
Correspondent banking, a system that enables banks to make payments and facilitate cross-border transactions, has become increasingly restricted for Zimbabwean banks.
Describing the uphill battle facing the financial sector, Raymond Madziva, a banker, said; “Zimbabwean companies and individuals have found it extremely difficult to effect payments through international payment platforms as these transactions are intercepted and blocked in the sanctions-imposing countries, especially the US.
“As a result, there are many cases of blocked funds or failure to transact in the business sector and among individuals.”
The reduced number of correspondent banking relationships has increased the cost and complexity of conducting international transactions.
Importers struggle to pay suppliers, while exporters lack access to foreign currency, both of which are necessary for Zimbabwe to remain competitive in the global market.
Mr Madziva warned that without a stable correspondent banking network, Zimbabwe’s foreign currency reserves are limited, affecting the government’s ability to stabilise the currency.
“Limited reserves affect the Government’s ability to stabilise the currency, leading to inflationary pressures, which in turn deter both local and foreign investment,” he adds.
For Zimbabwe, the cost of these economic challenges goes beyond lost opportunities and missed investments, it impacts the very fabric of society.
With reduced economic prospects and rising poverty, Zimbabweans face declining living standards, increasing inequality, and a shrinking middle class.
Development economist Dr Itai Mahlangu said, “Sanctions have made it increasingly difficult for Zimbabwe to invest in critical areas like healthcare, education, and infrastructure, all of which are essential for raising people out of poverty and reducing inequality.”
Furthermore, Ms Moyo highlighted the long-term implications for the next generation, explaining that, “Without a strong manufacturing and export sector, our young people are left with fewer job prospects and less economic stability. Sanctions have stunted Zimbabwe’s ability to build a future.”
As Zimbabwe continues to persevere under the weight of sanctions, the nation’s economic potential remains locked, its people deprived of opportunities, and its economy in a perpetual state of recovery.
While the international community debates the effectiveness and morality of sanctions, Zimbabwe endures the brunt of the crisis, a cost that is increasingly borne by its citizens.
The Ministry of Finance, Economic Development and Investment Promotion, Zimbabwe has lost at least US$40 billion in international funding support and development assistance due to sanctions.
Source: all Africa.com
