US Sanctions On Zimbabwe's Elite Ricochet Across Economy

Harare, (UrduPoint / Pakistan Point News - 18th Jan, 2022 ) :Callisto Jokonya stands in the cavernous factory of Imperial Refrigeration and recalls the halcyon days.

In the 1990s, his factory, located in the Zimbabwean capital Harare, was buzzing.

It had a workforce of 350 people, who cranked out 20,000 refrigerators per year.

Today, the company employs just 50 people, and annual output is just 1,000 units.

Weeds grow outside many of the buildings in the surrounding industrial area. Some of the factories have been mothballed for years.

"Just that tells you what sanctions are," Jokonya told AFP.

He refers to one of biggest wounds suffered by the Zimbabwean economy -- US-led sanctions imposed two decades ago when then president Robert Mugabe launched a violent election crackdown.

Intended to apply to the elite, the sanctions imposed travel bans and a freeze on assets held top Zimbabwean officials.

But the measures have had a far-reaching -- and probably unintended -- impact on the Zimbabwean economy by strangling the country's access to the international banking system.

To take the case of Imperial Refrigeration, Jokonya wanted to get a loan to expand production at Imperial.

All his equipment needs to be imported, for which he has to pay in US dollars.

But the American law, known as the Zimbabwe Democracy and Economic Recovery Act (Zidera), forbids global lenders from working with Zimbabwe.

Institutions like the International Monetary Fund (IMF) are usually the first line of support for countries in financial trouble.

Zimbabwe has not met all of the requirements for IMF support -- and Zidera means there is little incentive for Harare to try, or for the IMF to look at compromises.

Private banks also struggle to access international funds. Zidera imposes stiff penalties for companies who deal with companies targeted by the law.

The result is that Zimbabwe has meagre supplies of US Dollars at home, and it is risky for entrepreneurs to seek access to greenbacks abroad via private banks.