Zimbabwe business leaders want Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono to devalue the local dollar by almost 100% when he announces his monetary policy review statement next week.
The Confederation of Zimbabwe Industries (CZI), regarded as the voice of business in the country, also wants Gono to reintroduce a two-tier exchange rate system for exporters as part of drastic changes it says could stimulate an export-led economic recovery for Zimbabwe.
Gono presents his monetary policy statement next Monday and is expected to announce steps to contain inflation, at the moment pegged at 1 184.6%, and a raft of other policy measures aimed at stimulating the recovery of Zimbabwe’s comatose economy.
In a paper entitled, CZI Input into Fiscal Policy Review July 2006, which was submitted to Gono, the business grouping said: “We recommend that the country moves back to a two-tier system where exporters retain 80% for own use and 20% is surrendered to government at a controlled rate.
“We recommend a controlled rate of 200 000 to the US dollar.”
The controlled official exchange rate for the Zimbabwe dollar against the American dollar has remained for months fixed at 101 195 to one greenback, a rate which even senior government officials admit in private is a gross distortion of the true market value of the ever-sliding Zimbabwe dollar.
The Zimbabwe dollar changes hands at anything above 400 000 to the American unit on the illegal but thriving black-market for foreign currency. The parallel market is the only sure source of hard cash for most individuals and businesses.
The CZI said a two-tier exchange-rate system should be brought back as a transitional measure that would cater for the government’s essential foreign-currency requirements while also cushioning exporters who it said were being severely prejudiced by hyperinflation.
As the economy recovered with more export earnings generated, the two-tier system could then be phased out, the CZI proposed.
“As the economy recovers, government revenue will rise sharply and they will be able to afford to pay market rates for foreign exchange. The two-tier system can therefore be phased out,” the business organisation said.
Gono, tasked by President Robert Mugabe to steer Zimbabwe’s sinking economy to safety, was not immediately available for comment on the recommendations of the business community to drastically knock down the value of the dollar and to bring back a two-tier exchange rate system.
The RBZ boss and Mugabe have in the past resisted a wholesale devaluation of the largely worthless Zimbabwe dollar over fears such a move could spark massive price increases across the board as the economy is now chiefly dependent on imports, even for the most basic of commodities that used to be produced locally.
Zimbabwe is grappling its worst-ever economic crisis marked by hyperinflation and shortages of fuel, electricity, essential medicines, hard cash and just about every basic survival commodity.
The opposition Movement for Democratic Change party and Western governments blame the crisis on repression and incorrect policies by Mugabe, such as his seizure of productive farms from whites for redistribution to landless blacks.
The farm seizures destabilised the mainstay agricultural sector and caused severe food shortages after the government failed to give black villagers resettled on former white farms skills training and input support to maintain production.
But Mugabe, who has ruled Zimbabwe since the country’s 1980 independence from Britain, denies mismanaging the country and says its problems are because of economic sabotage by Western governments opposed to his seizure of white land. — ZimOnline