Zimbabwe currency crashes

The value of the Zimbabwean dollar suffered its worst crash in memory, dealers said, sparking a run on dollars and forcing stores to close early to put new prices on what little they could afford to stock.

Black market exchange rates—fuelled by the central bank buying at the illegal rates to pay the mounting debts of crumbling state fuel and power utilities—rose to upward of Z$300 000 to one United States dollar in large offshore deals, one trader said on Thursday.

The official exchange rate is 15 000 to one.

“It’s gone crazy,” said the trader, who spoke on condition of anonymity because his dealings are illegal. “People are holding out for the highest bidder and mentioning as much as 400 000 to one which could be tomorrow’s price. It’s changing by the hour.”

The going rate doubled since Monday, he said.
In local deals, the US currency fetched at least 140 000 to one in cash and around 200 000 to one in electronic bank transfers. Shortages of Zimbabwe bank notes created the premium on bank transfers, said the illegal dealer.

Zimbabwe has the world’s highest rate of inflation, estimated officially at around 4 500% but calculated by independent finance houses at closer to 9 000%.

A hardware store in northern Harare closed its doors on Monday and Tuesday to re-price all its goods. Supermarkets and other shops are planning to shorten opening hours to make price changes, enabling them to buy replacement stock at higher prices.

A journalist for Zimbabwe’s official Herald newspaper reported that she had returned home from a week in South Africa to discover that during her absence the price of beef had increased 2,5 times, a bottle of cooking oil had doubled and bus fares had gone up between three and fivefold.

‘Total madness’

“The price movements in the past week are nothing short of total madness,” wrote Victoria Ruzvidzo in Thursday’s edition of the newspaper, a government mouthpiece.

Store managers say the range of goods on sale has diminished drastically—imported products are expensive and local factories are too crippled by inflation to produce goods. Meanwhile, the few workers who can afford the fuel to get to work are demanding higher wages.

“If it goes on like this, we’ll have nothing to sell, we’ll have no staff and we’ll have to close down completely,” said one store manager who asked not to be identified out of fear of being targeted for being “a prophet of doom” by often-violent ruling party militants.

The illegal black market money dealer said talks held in South Africa this week between the Zimbabwe government and the country’s political opposition also led to business uncertainty.

The official media on Thursday accused the opposition Movement for Democratic Change of negotiating “in bad faith” to end the nation’s political deadlock.

The Herald quoted government sources saying current visits to Europe by opposition leaders Morgan Tsvangirai and Arthur Mutambara were meant to scuttle the regional initiative led by South African president to bring the two sides to the table.

It described the opposition leaders’ trip to meet with European leaders and canvass for support from Gordon Brown, Britain’s Chancellor of the Exchequer, as “provocative”.

President Robert Mugabe has repeatedly accused Britain and the United States of backing a campaign by his opponents to oust him with funding and expertise.

South African President Thabo Mbeki was to report to an African Union summit the end of next week on the state of the negotiations, his Deputy Foreign Minister Aziz Pahad said on Thursday.

The Fishmongers

Zimbabwe’s official media also alleged on Thursday it had received “a secret document” detailing a plot by Western countries to undermine the economy. The plot is apparently masterminded by Zimbabweans and foreigners and is known as the Fishmongers Group.

Western economic measures including a freeze on balance of payments loans and curbs on investment and aid.

Once longtime ruler Mugabe left office, Western countries planned to step in with a $3-billion rescue package to rebuild the nation, the state daily Chronicle reported in the second city of Bulawayo.

Western officials have confirmed the existence of budget proposals for food support, public-services reform and the rebuilding of agriculture and general infrastructure over five years in a new political landscape led by reformist Zimbabwean politicians.

But according to the fiercely pro-Mugabe official media, the Fishmongers Group was “working overtime to destroy the economy, mutilate the Zimbabwe dollar, foment civil unrest and then dangle a rescue package to win the support of gullible politicians”. - Sapa-AP

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