Zimbabwe's central bank chief admits failure

Zimbabwe's central bank chief admits failure

GONO

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• Gono's 'sleepless nights' over inflation

• Gono fighting a losing battle

• Gono, the Zimbabwean Napoleon

• The small minds in charge of our economy

• Overcoming the 'Messiah Complex'

By Staff Reporter

GIDEON Gono on Thursday stood before the nation to admit his economic turnaround project was in disarray.

He admitted his frustrations at the failure to breathe life into Zimbabwe's comatose economy, and appeared to suggest the biggest impediment was a political oligarchy unwilling to embrace his reforms.

"Unfortunately for us Zimbabweans (the) Superman or Superwoman that can perform miracles for us is not yet born," the Reserve Bank governor said in a statement which his political opponents latched on to suggest he was frustrated at President Robert Mugabe lack of political backing for his project.

"We are today, fellow Zimbabweans, tempted to ask the Lord in our daily prayers, to let this burden pass away, and pass away quickly," he added in a message interpreted as a reference to Mugabe.

As revealed here on Tuesday, Gono devalued the Zimbabwean dollar by 45 percent, raising the exchange rate from 1:$6200 against the United States dollar to $9000, which is still way below the 1:18000 exchange rate on the illegal parallel market.

Gono sought to justify this, telling expectant exporters: "We have strongly resisted this approach for the simple reason that to depreciate our currency, without other supportive preconditions in the economy, will be to invite further cost-push or import-cost inflation.

"The unfolding drought situation has therefore, made it necessary that as monetary authorities we revise our annual inflation rate target from the previous 20-35 percent to 50-80 percent by December 2005," he said.

Due to tight monetary measures and fiscal discipline, Gono said since December 2003, the country's inflation declined progressively from 622.8 percent in January 2004 to 123.7 percent in March 2005.

This downward trend was however reversed in April 2005 when annual inflation picked up to 129.1 percent, reflecting the resurging inflationary pressures in the economy that he said require more aggressive anti-inflation measures.

Month-on-month inflation, which had also declined to 4.2 percent in March 2005, shot up to 7.4 percent last month.

Gono said a recent study carried out by the central bank's sub-teams had revealed that food, rent and rates, education and energy were the major exogenous drivers of inflation in Zimbabwe.

He said as a central bank with developmental thrust in an agro-based economy prone to droughts, they were not going to pursue policies that undermine people's livelihoods to second place in fighting inflation.

"At the same time, we will not sit back and surrender our fight against inflation and other economic ills to unpredictable and uncontrollable measures," he said

Economioc commentators said Gono's monetary policy contained no revolutionary measures to stem the tide of run-away inflation and shortages of basic commodities. Although his growingly frustrated, his closest advisers say he is too loyal to Mugabe to quit.
READ GONO'S MONETARY POLICY
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