Greece has become the first developed nation to default on a loan from the International Monetary Fund, missing a more than$1,6 billion repayment to the global crisis lender.
Zimbabwe was the last country to default in 2001; Somalia has been in arrears since 1987, and Sudan since 1984. But are there any parallels between Greece and Zimbabwe?
Greece joins the company of Zimbabwe, Somalia and Sudan in falling behind in its payments to the IMF. The situation in Greece resembles what happened to Zimbabwe before dollarization.
Zimbabwe adopted a basket of multi-currencies in 2009, dominated by the United States dollar. It replaced the local currency which had been devastated a whopping inflation rate of 238 million percent by august 2008.
However, Zimbabwe continued to have cash shortages that caused many to sleep all night outside banks to withdraw their money.
As a solution, the government last year added several other currencies to the basket used by Zimbabwe consumers, including: the Chinese yuan, Japanese yen, Indian rupee and Australian dollar to the basket of foreign currencies which include the South African rand, Botswana pula, the British pound and the euro.
Zimbabweans can testify that it was a time of gnashing of teeth as the cash crisis worsened. It persisted until December 2013 as banks even resorted to giving people vouchers instead of hard cash to use instead of hard cash.
A similar melt-down is happening in Greece.
Greek leaders shuttered their banks for days and imposed strict limits on ATM withdrawals amid rising global concerns about the nation’s economic future. Economists say the closing of banks are clear signs that Athens’ five year battle to stay in the shared euro currency may be coming to a dead end.
Panicked Greek citizens, like Zimbabweans before them are pulling their money from their accounts while they still could. ATMS in Athens are running out of money, and tensions are reaching boiling point as Greeks stand in line for hours for cash for basic supplies. Lines are forming at gas stations as worried residents top off their tanks for what could be a protracted period of time in a cashless nation.
In Athens, crowds of anxious elderly Greeks have been thronging banks beginning before dawn, struggling to withdraw their weekly maximum of 134 dollars. This, after the government reopened some banks to help pensioners who don’t have bank cards.
This is an experience that Zimbabwean’s are well too familiar with. Former finance minister Tendai Biti said Greece like Zimbabwe did not live within its means.
Biti said for the IMF to forgive Greece at the expense of Zimbabwe and other struggling countries might be problematic.
Steve Hanke, professor of applied economics at Johns Hopkins University and a former senior economist on President Ronald Reagan’s council of economic advisers said Greece is destined to become a financial zombie state.
Hanke who has written a book on Zimbabwe titled, 'Zimbabwe: Hyperinflation to Growth', said there are many parallels between Zimbabwe and Greece.
University of Zimbabwe economics professor Tony Hawkins said Zimbabwe like Greece faces the problem of being tied to a currency it cannot control.
Hawkins said the IMF and the World Bank are ignoring a growing debt crisis in Greece in particular and the world in general which has wide implications.
Chairman of the Zimbabwe Coalition on Debt and Development, Joy Mabenge, said the austerity measures demanded by the IMF might have contributed to the defaulting of both Harare and Athens.
Some economists argue that mismanagement is to a large degree the cause of Athens and Harare’s financial troubles and only strong political will can address the crises.