GIDEON Gono . . . effectively devalued the Zimbabwe dollar yesterday

By Hendricks Chizhanje and Tsungai Murandu

HARARE – Zimbabwe’s annual inflation quickened to a record 2 200 percent in March, in yet another signal that President Robert Mugabe’s government was losing the race against time to save the hemorrhaging economy from total collapse. 

"Year-on-year inflation, which stood at 1 072.2 percent in October last year, rose to 1 281.1 in December and has risen to 2 200 percent by March," Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono said in a statement televised to the nation. 

Zimbabwe is in the grip of a severe economic crisis, which has left the majority of the country’s 12 million people mired in poverty as unemployment rockets amid shortages of food, hard cash and every basic survival commodity. 

Critics blame the crisis on repression and wrong policies by Mugabe - charges he denies. 

Gono, who made his interim monetary policy statement two months ahead of schedule to try to tackle the crisis, vehemently dismissed calls by business leaders to devalue the Zimbabwe dollar. 

But economic analysts said the RBZ chief effectively devalued the dollar - albeit through the backdoor - when he announced a Drought Mitigation and Economic Stabilisation Fund whose overall effect was to shift the Zimbabwe dollar from its fixed rate of 250 against the United States dollar to 15 000 against the American unit. 

"Let me remind members of the public, the media in particular, that we have not devalued the Zimbabwe dollar but we have only introduced measures aimed at enhancing the generation of foreign exchange that are sector-specific," Gono insisted in his statement. 

Bulawayo-based economic commentator Eric Bloch said the stabilisation fund was "tantamount to devaluation except that it does not have a major impact on all sectors of the economy." 

"It will, however, ensure a viable effective exchange rate for all exporters," he told ZimOnline. 

The fund, which came into force immediately, would be applicable to exporters, tourism players, non-governmental organisations, Zimbabweans in the Diaspora and local individuals with free funds to sell to the RBZ. 

Under the arrangement, holders of foreign currency can sell their funds directly to the central bank or through money transfer agencies, Homelink kiosks and authorised dealers. 

The applicable exchange rate would remain at $250 to the greenback but the sellers would in addition receive a "mitigation factor" of 60. 

This means that all amounts arrived at by multiplying the exchange rate and the amount tendered would have to be multiplied by 60. For instance, every US$100 bill would now yield $1.5 million using the formula. 

Analysts said the fund was one of the recommendations from this month's economic rescue mission by Southern African Development Community (SADC) executive secretary, Tomaz Salomao. 

Salomao visited Zimbabwe at the behest of SADC leaders who directed at their extraordinary summit in Dar es Salaam, Tanzania, that the regional body should assist Harare to get out of a seven-year-old economic crisis. 

Proceeds from the fund would be used to build up the country's foreign exchange reserves, currently estimated at below one week's import cover. Gono also called for the lifting of economic sanctions on the southern African country. 

"Let me make a clarion call to business, political parties, churches, the media and Zimbabweans in the Diaspora to bring to the attention of the West the impact that sanctions, declared or undeclared, are having on the people and to urge them to lift these sanctions," Gono said. 

Zimbabwe has grappled under "targeted sanctions" imposed by Britain, the United States, Australia and the European Union in 2002 on Mugabe and more than 100 of his top lieutenants for alleged human rights abuses and their role in causing the suffering of Zimbabweans. 

The sanctions, which were renewed by the EU in February, have resulted in the drying up of lines of credit for most Zimbabwean firms and shortages of food. 

The central bank governor also announced that Zimbabwe had imported 500 000 tonnes of maize following another poor season. - ZimOnline