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07 Sep 2007 15:46
President Robert Mugabe’s exchange-rate devaluation and promises of tax relief were dismissed on Friday by Zimbabweans weary of an economic crisis marked by the world’s highest inflation and severe shortages.
His government’s latest bid to ease the economic turmoil, announced in a supplementary budget on Thursday, highlighted the worsening plight of the Southern African nation and widespread fears that cash will be worthless in the face of runaway prices.
Zimbabwe’s inflation rate has surpassed 7 600%.
Finance Minister Samuel Mumbengegwi—who devalued the official exchange rates—said on Thursday that the tax changes would see a worker earning Z$4-million a month no longer pay tax. The threshold had previously been Z$1,5-million.
But that raised few spirits on Friday on the streets of Harare, where a chicken costs Z$1-million.
“This [budget] is ridiculous,” said Tawanda Sambaza, an electrical technician in Harare.
“I can only buy four chickens with that money on the other [black] market because there is nothing in the shops,” added Sambaza, who earns Z$14-million more than the average Zimbabwean.
Queues for everything from soda to maize-meal are getting longer.
Zimbabwe’s main bakery said this week that bread shortages would worsen after closing one of its outlets due to a lack of wheat from Mozambique.
A growing number of Zimbabweans have resorted to using a thriving black market for foreign currency to try to protect themselves against the inflation that has caused the Zimbabwean dollar to plummet in value.
The government on Thursday scrapped a two-tier foreign-exchange system for government and exporters, devaluing both rates for the Zimbabwe dollar to 30 000 against the greenback.
Zimbabwe had applied an exchange rate of 250 to the United States currency for government transactions and had allowed exporters and foreign currency account holders to exchange at a rate of 15 000 prior to the move.
The new rate still falls short of a widely used black market rate of about 250 000 to the US dollar.
Amid fears that the economic bleeding could lead to growing support for a divided opposition, Mugabe, in power since independence from Britain in 1980, has cracked down on political opponents, tightening his grip on power ahead of presidential and parliamentary elections expected next year.
But the economic crisis may pose the biggest threat to his rule, analysts say, and his Western foes, who have imposed sanctions in a bid to weaken Mugabe’s rule, are still banking on their strategy.
“On the political front the government may be winning but the economy is its Achilles’ heel,” Eldred Masunungure, a political analyst, said.
Mugabe remains defiant, attempting to focus attention on the Western powers he accuses of sabotaging Zimbabwe’s economy in retaliation for his controversial seizure of white-owned farms for redistribution to landless black Zimbabweans, analysts say.
He is likely to push a Bill through parliament, dominated by his Zanu-PF party, that would give Zimbabweans majority ownership of foreign-owned firms, fuelling fears it will drive away the few remaining foreign investors.
The veteran leader’s salary, along with those of his ministers, was sharply raised this year. Veterans of Zimbabwe’s anti-colonial struggle, among the hardest core supporters of his government, also saw their allowances increased.
“I’m disappointed there’s no real attempt to cut spending,” economic commentator Eric Bloch told Reuters.
“The income tax measures are not sufficient ... they are still taxing people who are starving.”—Reuters
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