/ 6 September 2007

Zimbabwe devalues currency

Zimbabwe Finance Minister Samuel Mumbengegwi on Thursday massively devalued the local dollar in a bid to attract scarce foreign currency to the official market.

In a supplementary budget speech broadcast live on state radio, Mumbengegwi said the Zimbabwe dollar would now trade at 30 000 to the United States dollar, down from 250.

Sellers of foreign currency were already allowed to surrender their hard cash at the preferential rate of 15 000 to the greenback.

”From now on there will be one flat rate of 30 000:1,” the minister told Parliament in central Harare as he announced a supplementary budget of Z$37,1-trillion.

The new rate is still well below prevailing black-market rates for desperately needed foreign exchange. The US dollar was trading at 255 000 Zimbabwe dollars on Thursday, with the British pound trading at 510 000.

Long-time President Robert Mugabe blames shortages of hard cash on sanctions and the withdrawal of balance of payments support from donors.

But critics point to the decline of the agricultural sector following a controversial land reform programme launched seven years ago, in which land owned by white farmers was seized.

They also highlight the huge drop in tourist arrivals, the closure of dozens of manufacturing companies and the wholesale flight of foreign investment. — Sapa-dpa