Zimbabwe government’s will abolish the thriving foreign exchange bureaux, at a time when parallel market rates for foreign currency have reached record highs, Finance Minister Herbert Murerwa said on Thursday.
Zimbabwe announced plans Thursday to shut down all private foreign exchange bureaux and introduce tighter hard currency controls in an effort to stop ”abuses” that have spurred black market rates of up to 30 times the official rate.
Finance Minister Herbert Murerwa, presenting his 2003 budget to Parliament, said only registered banks will be allowed to handle hard currency brought in by exporters, companies and individuals. Licensed exchange bureaus will be abolished by the end of the month.
The announcement came amid Zimbabwe’s worst economic crisis. The situation has been exacerbated by political violence and the government’s program of seizing white-owned commercial farms in this agriculture-based economy, analysts said.
Murerwa said the economy shrunk by 11% this year — compared to a seven percent decline last year — and the state was expected to spend 17,8% more than its revenue, well above the 14,1% that had been forecast.
The scarcity of hard currency has led to shortages in fuel and other essential imports and has hampered efforts to import grain to help alleviate a food crisis.
While under the official, pegged exchange rate, it takes 55 Zimbabwean dollars to buy $1, parallel market rates have risen as high as Z$2,100 to US$1 in recent days.
Foreign exchange bureaux had been offering a blended rate, changing 40% of hard currency at the official rate, with the balance sold at unofficial rates.
But Murerwa said there had been ”rampant abuse” of hard currency earnings. Under the new rules, half the incoming currency will have to be changed by the banks at the official exchange rate, and the rest will be held by the central bank and exchanged later under a ”priority list” of exchange rates linked to exports and essential imports, Murerwa said.
”The above exchange control measures will be reviewed in due course when the foreign exchange situation improves,” he said.
The government has refused to devalue the currency and Murerwa did not mention plans to change that policy. He also did not address the fuel shortages. He did announce increased duties on luxury imports and wines.
”We cannot continue to nurse this unsustainable situation,” he said.
Official annual inflation was set to reach a record 144% this year, he said, and tightening hard currency controls would help draw inflation back to a ”double digit” rate next year, Murerwa said.
The International Money Fund, however, has forecast inflation to reach at least 500% next year, according to current economic indicators.
Murerwa said overall agricultural production slumped by 20,2% this year and unemployment soared as troubled industries operated at about 60% below their capacity.
With more than half the nation’s 12,5-million people facing hunger in the coming months, the government needed to import food worth US$359-million this year to last through the first three months of next year, Murerwa said.
The food shortages have been blamed on a drought and the farm seizures.
Economic analyst Tony Hawkins said Murerwa’s proposals were ”a nonevent based on wishful thinking.”
”He has done little to really improve the economy and might well have made things worse by inaction and illusion,” Hawkins said. Murerwa said foreign grants and hard currency loans declined this year by about 80%.
Most foreign loans and investment have dried up to protest two-and-a-half years of political violence blamed mostly on ruling party militants, disputed presidential March elections that many independent observers said were rigged and the farm seizures. Tobacco production and mining, the main hard currency earners, have declined sharply.
Murerwa said tourism, the third biggest hard currency earner, ”was most deeply affected by negative publicity” Zimbabwe received abroad.
He said the handing over of former white-owned farms to blacks was expected to improve economic growth in the future. ”It is redressing historical inequalities in land ownership. It has provided the most profound economic empowerment of our people … our focus now is to assist the new farmers,” he said.
Critics accuse President Robert Mugabe of using the seizures as a political ploy to shore up his party’s floundering support. – Sapa-AP