The reserve bank governor announced an effective 45% devaluation of the Zimbabwean dollar, a ban on luxury imports and heavy subsidies for agriculture and exporters on Thursday to try to end an economic crisis that has seen mass arrests of black market traders, long lines for gasoline and stampedes for scarce foods.
Delivering his long-promised ”Post Election Monetary Policy Statement,” Gideon Gono rejected calls for the currency to be allowed to fall to current black market rates in excess of 25 000 Zimbabwe dollars to the US$1, but increased the official rate from 6 200 Zimbabwe dollars to 9 000 Zimbabwe dollars.
Patson Sithole, president of the Confederation of Zimbabwean industries said the devaluation would ”overall have a positive effect because we are trying to generate foreign currency. We need viable exchange rates”.
Gono delivered an address to legislators, bankers and businessmen that lasted nearly three hours and was filled with criticism of foreign speculators he said were sabotaging the revival of the economy.
”The country is now host to a number of dishonest foreign nationals who are busy externalising our foreign currency in suitcases,” he said.
He said economic growth targets had been lowered from five percent to two percent. Inflation, which it was hoped would be down to 20% by the year end, would be 80%.
Official inflation figures fell from 622% to 123,7% between January 2004 and January this year but many economists said government statisticians ignored Zimbabweans’ reliance on highly priced black market dealings for many staples.
Gono said inflation and interest rates could now only converge in late 2006.
He planned to increase interest rates from 30% to 170% while granting concessional loans as low as five percent to exporters and farmers.
Bonus payments were announced for tobacco and cotton growers, milk and meat producers, now overwhelmingly
black Zimbabweans in the wake of President Robert Mugabe’s seizure of 5 000 white owned farms since February 2000.
The seizures were followed by a catastrophic drop in agricultural output with tobacco, once the main foreign currency earner, down 70%.
Gono said the need to import food would greatly increase inflationary pressures.
Before March 31 parliamentary elections, Mugabe insisted that the country had a ”bumper harvest” of maize and would be self-sufficient in food.
But shortly after the poll — won by the ruling Zanu-PF party with a huge majority amid allegations of the
use of food as a political weapon to secure votes — the government said it would have to import 1,2-million tons of maize.
Mugabe this week agreed to meet James Morris, head of the UN’s World Food Programme, to discuss the maize imports. This followed a personal message from UN Secretary-General Kofi Annan, whose special representative, retired president Joaquim Chissano of
Mozambique, has arrived here for talks with Mugabe.
Meanwhile, a report in the state-controlled Herald newspaper said Mugabe had ordered a proposed new law controlling charities and private organisations to be sent back to the Zimbabwean parliament for revision, apparently to become even tougher.
Mugabe alleges voluntary organisations and charities, including churches, are being used to challenge his 25-year rule and channel funds to opponents. Foreign donations were already banned under the original draft of the law for organisations deemed to be focused on ”issues of governance,” including human rights.
The Herald said Mugabe wanted ”one or two issues” to be changed in the Non-Governmental Organisations’ Act, which require state permission to be given for any act of charity in a country dogged by malnutrition, poverty and highest rates of HIV/Aids.
It hinted at even tighter controls, particularly over funding.
Reports from the western city of Bulawayo said two women with babies on their backs were injured on Wednesday when hundreds of shoppers stampeded for a limited supply of sugar, not seen in stores for many weeks.
Long lines also formed for bread, wheat flour and maize meal, the staple diet of Zimbabwe’s 11.6 million people.
At a Harare filling station owned by a government minister, motorists who had waited two days for gasoline, sleeping in their cars, were disappointed when stocks ran out after preference was given to a last-minute ”VIP” line of limousines and off-road
vehicles, and uniformed soldiers in private cars.
The resulting near-riot caused gridlock on a major road. Drivers of fuel-starved minibuses which form the backbone of the capital’s public transport system were outraged but backed down in the face of threats by troops.
Gono said with immediate effect no approval would be given to import nonessential items and all others would be closely screened.
His officials would also tighten surveillance throughout the economy.
Zimbabwe’s high court Thursday began the trial of former finance minister Christopher Kuruneri. Held without bail for over a year, he entered not guilty pleas to five counts of exporting foreign currency but admitted breaching the Citizenship Act by retaining a Canadian passport. – Sapa-AP