Zimbabwe Abandons Fixed Official Exchange Rate

The Telegraph (UK) ^ | 9-7-2007 | Byron Dziva

[blam]

Zimbabwe abandons fixed official exchange rate

By Byron Dziva In Harare
Last Updated: 1:52am BST 07/09/2007

Zimbabwe injected a partial element of reality into its chaotic economy yesterday, abandoning its fixed official exchange rate of 250 Zimbabwean dollars to the US currency.

It fixed the new rate at Z$30,000 to the US dollar, an official devaluation of more than 99 per cent, but still well above its true value — on the black market US$1 fetches around Z$260,000.

The official rate is used for government transactions, but is also a hugely lucrative opportunity for senior officials in Robert Mugabe's regime, who are entitled to use it exchange the virtually worthless Zimbabwean currency for US dollars.

Mr Mugabe's mismanagement has given Zimbabwe has the highest inflation in the world, officially 7,634 per cent, and its economy has been shrinking for seven years.

Announcing the move, the finance minister Samuel Mumbengegwi admitted the country was in crisis, but blamed supposed sanctions by the West for the situation.

"In this environment characterised by absence of balance of payments support, withdrawals of lines of credit and disinvestment by foreign firms, foreign currency shortages for importation of raw materials, fuel, equipment and electricity continue to affect operations of the key economic sectors," he told parliament.

Hyperinflation has left the government with no remaining funds for the year, he said, and he introduced a supplementary budget to enable it to pay the salaries of government employees.

Zimbabweans who benefitted from the seizure of white-owned land would in future have to pay rent, he added, without giving details.

"Even from a common sense point of view, how does one reconcile the latest exchange rate from a thriving parallel market rate of Zim$260 000?" asked Tendai Biti, secretary-general of the opposition Movement for Democratic Change.

"They have been paralysed by incompetence." In the capital's shops shelves have been emptied by the government's price freeze, which has left producers unable to cover their costs and therefore ceasing manufacturing.

"We have sent home half our employees home because there is no more work here," said a supermarket manager in Harare's Avenues district.

"Even beer, there isn't any, just imported stuff, which is very expensive. But it's also running out.

"We are under instruction to fill up the space by authorities, but we can't fill up the empty shelves with anything."

[Smedley]

It fixed the new rate at Z$30,000 to the US dollar, an official devaluation of more than 99 per cent, but still well above its true value — on the black market US$1 fetches around Z$260,000.

So for $4 I could be a millionaire

[blam]

Zim Ping.

[Clive]

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[rabscuttle385]

"In this environment characterised by absence of balance of payments support, withdrawals of lines of credit and disinvestment by foreign firms, foreign currency shortages for importation of raw materials, fuel, equipment and electricity continue to affect operations of the key economic sectors," he told parliament.

Foreign firms don't want to invest because they think that you will take it away from them (on a whim). They will not lend you money, either, because of your corruption and your propensity to dissolve into anarchy.

Mugabe and company brought this whole storm on themselves. The fact that they are blaming others only reflects their desperation (they know what will happen when the music stops playing).

[mvpel]

Yeah, they’ll pack up the loot and retire in Switzerland.

[ken21]

when does zim imp

lode?

[vetvetdoug]

If New Orleans is the Chocolate City, then Zimbabwe is the Chocolate Country.

[GeronL]

here is some land we took from the whites, now pay rent