The ebullient central bank chief introduced a new supporting exchange rate measure which he said should not be confused with devaluation.

Presenting his Monetary Policy Interim Review Statement at Bulawayo's Large City Hall on Thursday, Gono said the local unit will remain trading at the fixed rate of 250 against the United States dollar.

"Whilst the Social Contract dialogue is progressing, it has become necessary that a framework be put in place to allow the central bank and the nation at large, the ability to urgently mobilise financing resources to repel the adverse effects of the drought, whilst maintaining the current official exchange rate at the prevailing levels of Z$250/US$," said Gono.

"With immediate effect, the Reserve Bank has established a Drought Mitigation and Economic Stabilisation Fund (DMESF) which is open to industrialists/manufacturers, miners, farmers, tour operators, NGOs, Embassies, Zimbabweans in the diaspora, individuals, transporters and any other holders or generators of foreign currency."

The new system, said Gono, allows a holder of foreign exchange to approach the central bank or any authorised dealers, Homelink or money transfer agents. In turn the RBZ or any of its partners such as the MTAs or Homelink, will buy the foreign currency at the current rate of Z$250 against the American dollar but would also award a Drought Mitigation Accelerator Factor of 60.

Gono said the Drought Mitigation Accelerator Factor of 60 is only applicable on foreign exchange bought for transmission to the RBZ and would go towards a Strategic National Fund.

"All other transactions will continue to be effected at the official exchange
rate of Z$250/US$. While the official exchange rate remains at 250, the RBZ will apply an indexation framework to the Drought Multiplier Factor to all those who contribute into the fund.

"This will be done in a manner that aligns the Zimbabwe dollar proceeds to inflation developments so as to guarantee viability to the generators of foreign currency. Please, the media you must note that this is not devaluation. The
exchange rate remains the same, " said Gono.

The RBZ boss, since the commencement of the year, has been facing pressure to devalue the local dollar which has taken severe battering against major currencies.

In his Monetary Policy Statement for the First Quarter presented in Harare on January 31, Gono deflated pressure from captains of industry calling for devaluation, arguing that it would not bring in "planeloads" of the scarce foreign currency.

Instead, he called for a holistic approach to tackle the economic morass and pinned the recovery on a social contract.

Despite putting in motion the wheels of a social contract which involves business, labour and government, there has been no clear commitment by the parties involved.

The dollar weakened further this week against the American dollar and other major currencies on the black market. On Thursday, the local currency was pegged at 350 against the South African Rand, 440 against the Botswana Pula, 40 000 against the Pound Sterling and 24 500 against the US$.

But Gono argued that there was still hope in the social contract and called for more discipline in all sectors of the economy.

The central bank chief also nreviewed his interest rate regime policy by adjusting interest rates upwards in a move he said was meant to curb speculative borrowing and inflationary pressures.

He hiked the Overnight Secured Rate to 600% up from 500% and Overnight Unsecured Rate was pushed upwards to 700% from 600%.

Gono said: "The adjustment and the realignment of the interest rate structure is designed to dissipate inflationary pressures and defend the currency, while ensuring consistency of returns between yields of different term structures.

"The inflation road ahead of us requires that no efforts be spared in ensuring that excess liquidity is mopped out of the markets, for it is this loose liquidity that props up speculative trading in foreign currency and other commodity markets."

In January, Gono declined to move upwards his interest rates arguing that the financial institutions needed the months of February and March to do some soul searching.

Zimbabwe has been dogged by an economic recession now its straight ninth year largely blamed on President Robert Mugabe's mishandling of the economy.